Sandoval's SharePoint Spot

See solution here:

http://rehmangul.sauftveyr.com/2008/04/23/can-not-add-the-user-because-a-user-with-that-name-already-exists/

Worked for me.

Good question, and more important, great feedback from Jie  Lie.

http://www.linkedin.com/groupAnswers?viewQuestionAndAnswers=&discussionID=14186886&gid=42512&trk=EML_anet_qa_ttle-cThOon0JumNFomgJt7dBpSBA

SharePoint search result is trimmed by permissions – which is working with content sources like SharePoint, File Share and Lotus Notes (if you choose to not ignore security). 

But keep in mind. Security info is picked up at indexing time OOB. So if you changed the permission of a file or folder, the result won’t be changed immediately until the next time it gets crawled (by full or incremental crawl). Custom security trimmer(CST) can help to do another round of realtime security trimming but it has a bad impact on performance.