I got an intranet site someone has made with links to office documents that sit in a share on the same sbs2008 server.

You click on the link to open a spreadsheet or whatever and it opens a read only copy. How do I make it open stuff and let the user edit the docs?

Users have modify permissions in ntfs and IIS as far as I can tell it all looks ok.

Are you referring to a SharePoint site, or a custom IIS hosted site?

If all it is a directory shortcut listing, I don't understand why you are not just using shares and mapped drives.