I'm trying set guest (or registered user) access to "participant" status in a folder or discussion. However after submitting the form the access permissions revert to their previous status.

Web Crossing must be broken!

You probably do not have the control panel switches for Guests (or Registered Users) set to permit posting of messages, or discussions, etc.

These control panel settings are master switches for the entire site. You can't set something more permissive in an access list than what is permitted in the control panel settings.

Under the GUESTS Control Panel, look for:

Add items
Permit guest users to post messages
Permit guests to add discussions
Permit guests to add links
Permit guests to add folders

And under the Registered Users C.P., similarly:

Add items to all levels

Permit registered users to post messages
Permit registered users to add discussions
Permit registered users to add links
Permit registered users to add folders and folder items