Even if I change all permissions to yes for banned user group if a member is banned via warning system, it doesn't seem to take affect. All I get is a total lock down and the reason for the ban even though banned user group has all permissions to yes. Any ideas?
May I suggest that you give this restricted (but not fully banned) group of users a slightly different name to avoid confusion with the full Ban that has a specific result as described above? For example, in our case we term such users "Suspended"; they have some very limited residual permissions (eg so they may appeal).