So I have a hard drive set up on our Airport extreme at home office. I wanted to see if its possible to set user permissions for certain folders (allowing certain users to access only the folders I have set permission for them to have).
AFAIK, no. You can set up per-user access to the disk as a whole (aka disk access with accounts). This, however, will result in a user's home folder being created on drive root. Every user's access is limited to his/her home folder. https://discussions.apple.com/docs/DOC-2280
To the best of my knowledge there is no finer-grained (eg assigned to individual subfolders and/or files) access control possible.