Bug: Annotation layers inside group layers are ignored as barriers for label placement
** This issue is addressed in ArcGIS 9.0 Service Pack 2 (SP2) **
When placed inside of a group layer the conflict detection settings for annotation layers are ignored.
For example, placing an annotation layer with feature weight set to high inside a group layer allows labels from layers with label weights set to low to be placed ontop of the annotation features. Moving the annotation layer out of the group layer solves the problem.
Click on the link in Related Information below and download Service Pack 2, if necessary. **
If ArcGIS 9.0 Service Pack 2 is unavailable, moving the annotation layer out of the group layer solves the problem.