SQL Server 2000 shipped with different trace file security than later builds of SQL Server 2000, SQL Server 2005 and SQL Server 2008.
The SQL Server process (sqlservr.exe) writes the trace files to the specified destination. The SQL Server 2000 release did not explicitly set the ACLs on the file when it was created. The behavior was to allow the file to inherit the permissions of the destination directory.
Closer inspection quickly indicates that for security reasons this is not the best design. The trace files (.trc) can contain sensitive data (names, addresses, account numbers, ....). These files need to be treated in a sensitive manor just like the database files (.mdf, .ldf).
SQL Server now ACLs the trace files with the same user permissions as that of the database files. This is usually the service account SQL Server executes under and the Computer\Administrators group. The permissions of the directory are no longer inherited.
The owner of the trace files must explicitly grant security permissions to others in accordance with security policies and company guidelines.
SQL Server Senior Escalation Engineer