jazzkid -
I do not think this is possible because the user will presumably have rights to read/list the dir which holds the restricted subdir by virtue of inherited rights. You could try denying explicitely denying access to the resource for the user.

Something like:
C:\Test ---> R/E
C:\Test\Mine ---> R/W/E
C:\Test\Yours ---> No access

Give it a try, let me know how it works.

Bill