Windows 2003 SP1 has this “new” feature called abde or access-based directory enumeration. It allows you to configure a share so that users only see the subfolders they have access to. Should have been in Windows Server from the start. Better late than never.

The download contains a GUI and command-line application to turn it on. The feature is not on by default after SP1 installation.

Download details: Windows Server 2003 Access-based Enumeration