Once again I have just spent around an hour troubleshooting something which on the face of it should just work – Group Policy Loopback Processing.
A sure fire way to a headache.
Anyway, this post saved me from my frustration.
http://blogs.technet.com/b/askds/archive/2013/05/21/back-to-the-loopback-troubleshooting-group-policy-loopback-processing-part-2.aspx