I confirm your problem:
On the left: In Firefox, I shared a library read-write with another user, but limit the folder permissions to “read-only online” for a folder in that shared library.
Middle: With the sync client, I sync the library to my computer. The moment I set the folder permission, the sync of that library throws an error.
On the right: The sync of the the entire library comes to a standstill. File dropped in the library are not synced any more. Hence, the error message in the sync client actually applies to the entire library, not only to the one folder.
What is the workaround? Separate the “read-only online” contents in a separate library. Apparently, the sync client cannot handle this conflict at this point.
This is something for the developers. @Jonathan: Could you have a look at this?