I have followed the steps for creating permissions for a specific Virtuemart category and tied it to the Joomla usergroup. The only way I can get the edit icon to work on the front end is if I set the usergroup under "Super User" - this gives too much access. If I set the usergroup under "Administrator" when I click the "edit" pencil on the front end, I get "Restricted Access".
Have You edited the ACL settings under System->Global Settings ?
Jörgen @ Kreativ Fotografi