Here you can read the error that says “Offline Files unable to make available offline on . Access is denied.‘
Offline Files typically generates this error message when the user does not have sufficient permissions for the content on the remote share. There are lots of complaints from users that even though they have read permissions on the share they still get this error. Microsoft says that this issue occurs when the users do not have read permissions to the root folder of the share on which the file/folder resides. The solution to this issue is to grant read permissions to the root folder too. See //support.microsoft.com/kb/275461 for more information on this.
I have see this problem occurring most commonly in scenarios where the remote share is not a native windows smb share. For example if the remote server is a linux machine and the share is created using Samba then this issue may occur.
Other scenarios where offline files gives access denied error:
You may get access denied error when you are trying to synchronize a drive which is mapped to a Home share of the user and is made available offline. For this issue you can install the fix available at //support.microsoft.com/kb/837917. This hotfix applies to XP and XP SP1 versions.
The other scenario where you may get access denied error is described below.
Offline Files or CSC tries to synchronize offline files as long as the system is on, not just when the user is logged in. Suppose user A has marked some files for offline cache and logged off. Now user B logs in to the system. Offline Files still tries to synchronize user A’s offline files and prompts user B for credentials. If user B does not supply the credentials or even if the supplied credentials does not have access to the share, Offline Files will generate access denied error.
Fix for this problem is available in this hotfix //support.microsoft.com/kb/811660. This fix is applicable to XP without any service packs installed. Upgrading to any of the service packs would also install the fix automatically. If your computer is running on SP1/SP2/SP3 then you already have the fix.