The readonly attribute on a folder does not mean what it sounds like. The kernel does not enforce that attribute on folders. Explorer uses it to signal folders that have a
desktop.ini file that should be processed to specify the folder's style, icons, background artwork, and general web-ish presentation behaviors.
The readonly attribute on a file does mean what it sounds like, but its role is probably better served in NTFS by a suitable ACL which can provide a much finer level of control.
Nearly all Windows software completely ignores the readonly attribute on folders.
Occasionally, you will stumble across something (usually ported from Unix) that has attempted to map the FAT file attributes into Unix file modes. Since the only FAT attribute that is close in meaning to any of the Unix mode bits is the readonly attribute, its presence is usually reflected as meaning the same as the absence of the
w bits. However, that is only true of ordinary files. If the directory attribute is set, then the readonly bit should be ignored. Any program that believes that the readonly attribute on a folder means the folder can't be written simply has a bug and the issue should be taken up in the program's support channel.
Some KB Resources that might help:
And some thoughts from Raymond Chen of The Old New Thing: