I think microsoft would say that behaviour is by design,
ie you can either use the calendar on the public folder
or the calendar in your mailbox,
Also in E2K (not sure about E2K3) to use a calendar as a ‘resource’ it needs to be part of a mailbox, rather than a folder.
If there was a problem with you free busy folder then you wouldnt be able to see other users calendars, nothing to do with calendars on a P.Folder.
Another problem with creating appointments on a PFolder is you dont have built in reminders.
Sorry if thats not much help.