AD Group membership not updating in Sharepoint Foundation when adding Active Directory group to Sharepoint group

I have Sharepoint Foundation installed with the latest CU updates.  It is running on a VMware box (Windows Server 2008 R2 Standard) with its backend on a SQL Server 2008 R2 vmware box.  The farm account is a domain user and has been given all appropriate replication rights, etc to active directory.

Everything seems to be working fine except for security integrated with AD groups.  When I go to edit permissions I can add individual AD users just fine and remove them just fine and their access is taken away right away or given to them right away. I can also find AD groups in the people picker and add them to the site. When I add new groups to AD, they are found immediately within Sharepoint, and when I delete groups from AD, they are taken out of the people picker right away.  Now comes the weird part.  When I add an AD group to the site, all users currently within that AD group are given access to the Sharepoint Site.  This works for the first time only.  Now when I add or remove users from the AD groups, it does not update in SharePoint.  For example, I have an AD testuser1 in the AD Group "All Users".  testuser1 does not have access to SharePoint.  So I add  the AD group to the Sharepoint group "Visitors".  testuser1 now has read access to the sharepoint site.  Now, I remove testuser1 from the AD group, but testuser 1 still has access to the site even though he is not part of the AD group, nor does he have any individual permissions to the site.  Now, I add testuser2 to the ad group.  testuser2 does not have access to the site, even though he is part of the ad group.

It seems that the only time AD group security is working for me is when I first initially add the AD group to the site.  From then on, it's like sharepoint is caching the members of the group and not updating any new adds or deletes from the groups. Any ideas?  I am lost on where to go from here as I have tried everything from clearing cache files, rebooting servers, iisresets....