When you install a fresh copy of Windows XP on an NTFS partition, the default permissions on the the ALL Users folder, and its' sub-folder with inheritable permissions, are:

Administrators:   All items (including Full Control) are selected.                               Everyone:         Read & Execute, List Folder Contents, and Read are selected.                               Power Users:      All items except Full Control are selected.                               System:           All items (including Full Control) are selected.                              Users:            Read & Execute, List Folder Contents, and Read are selected.
When you run Convert.exe, the All Users folder, and its' sub-folder with inheritable permissions, only show
Everyone:         All items (including Full Control) are selected.
Convert.exe uses the %SystemRoot%\Security\Templates\Setup Security.inf file to apply security settings. Since Windows XP was installed on a FAT32 partition, the file security settings are NOT appropriate.

To workaround this behavior, reset the permissions on the All Users folder per the NTFS installation defaults.