This functionality is available starting in Release 11i. In Releases 11 and lower, one cannot set security for standard reports. Security Rules will only limit users from a few functions (e.g. Account Inquiry, Budgets, Journal Entries, and FSGs). In addition, in Release 11i there is limited use of the security rule functionality for running standard reports. It appears that you're the goal to restrict...

Yes it is possible. You would enable security on the value set, but then on the flexfield segment (intercompany) you would not enable security.

You cannot apply different security rules to the same responsibility for different users based on the user ID. You will have to create a new responsibility and define its own security rules. Then you can assign the new responsibility to one of the users.

Security rules apply only with regards to creation/modification of lines within a journal. They do not apply when the journal is posted.

Flexfield Value Security gives you the capability to restrict the set of values a user can use during data entry. With easy-to-define security rules and responsibility level control, you can quickly set up data entry security on your flexfield segments and report parameters. Flexfield Value Security lets you determine who can use flexfield segment values and report parameter values. Based on your responsibility...

There is not a way in the same set of books, to prevent users from one operating unit via security rules, from changing cross validation rules for another operating unit. The only way to do this would to be create  a separate set of books for each operating unit. Since security rules prevent users from either viewing data or entering data in general, they do not pertain to set up issues such as...

This is working as intended. Security rules will prohibit a responsibility from being able to enter in certain values as well as prohibit the viewing of those values as well. However security rules will not prohibit the actions above because they are in the same set of books. The system does not determine if a journal has values in it that are blocked by security rules. If it did that, then the journal...

Check your Accounting Flexfield Structure possibly it is frozen. Unfreeze the Structure and then you should be able to enable Security for the Segment.  

System allows the account the customer wanted but doesn't disallow the ones that are children of the parent values excluded.

The Security rule should not be modified by deleting an exclude or include as it may corrupt the rule. One should try to delete all rule lines (include and excludes) save and redefine the include and exclude the way that it should work and save. If the rule still doesn't work, it may be necessary to create a new rule and assign it to the responsibilities in place of the original rule.