I couldn't find anything by searching here, google or Apple's discussion boards. This looks like a a bug to me. If I have an external firewire drive plugged into my G4 with 10.3.5 with the ownership and group set to exclude other OS X users and the "Ignore ownership on this volume" is not checked. A different user can check this box. No authentication dialog pops up, OS X just immediately disables all permissions on the drive.
In searching I've found this:
Mac OS X Server, Xserve: Disabling "Ignore ownership on this volume" via the command line (vsdbutil)
But the command line utility does exactly what the Info gui does. The command line command does work for a non-firewire, non-external ATA drive by requiring authentication to click on the checkbox.
The other oddity is that the user can disable ownership with authentication, but to turn permissions back on, the user needs to authenticate. It is almost like the software is backwards.
Has anyone else had this problem and do you have a solution? This seems like a pretty bad security issue. To keep data on my external drives private, I would have to eject and disconnect them and lock them in a file cabinet if I wanted to give someone guest access to my Mac. That seems pretty harsh.