You can see if the group document is corrupt.  Try to add the group the person is in to another ACL and see if he can se it.  If not, than remove the user from the group and run compact and UPDALL -r on the address book and then re-add him to the group.

1. Make sure you have listed the user in the group in the correct hierarchical format and that it matches the first entry in the User name field in the Person document. You might create a test group and add the user to it using the name picker instead of typing. If you do that, does Manage -> Groups then find it?
2. The name picker test is good because it will quickly tell you if your admin client is pointing to the right domain. You might get an error like you are seeing if your admin client is pointed to Domain A (location doc, admin preferences) but you are trying to administer Domain B. In that case, you'd likely not find the user in the name picker in Step 1, and you'd need to update your client to point to the right domain.
3. Does this happen for any other users or just this one?