icacls in windows 7 does not give full permission to write files in root drive.

We have a very old application based on Omnis7 that needs to create and read/write files on drive C: when running as a restricted user. In Windows XP to give this permission is quite trivial using cacls.

cacls C:\ /G Everyone:(C)

The equivalent icacls in Windows 7 will not work.

icacls C:\ /Grant Everyone:(M)

I have also tried the following.

icacls C:\ /Grant Everyone:(F)
icacls C:\ /Grant Domain\user:(F)

trying to create file with a restricted user gives this

C:\>copy nul text.txt
Access is denied.
0 file(s) copied.

After applying the icacls permissions above the result changes to this.

C:\>copy nul text.txt
A required privilege is not held by the client.
    0 file(s) copied.

Is this an issue with the way I am applying the permissions? Or is Window 7 being extremely strict?