You have to be the administrator indeed. I think you cannot override the settings for one folder only. It has to be at course level.
Yes, with the file manager the students should have the possibility to share files when they like. That is one important way collaborative learning works and I'm stunned that moodle doesn't have it since version 2.0 yet to come. There are hacks, but whatever I tried they where quite buggy and I have to give up. I even programmed a filemanager myself in order to facilitate self-determined file sharing. We'll see when Moodle 2.0 is released.
Give Edit Files access to a simple user
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