Ok, found what i was looking for after some time. for the benefit of the community here is where that hidden security setting is done.
For the new group, i needed to go under Team/Team Project Settings/Area and Iterations!!!!
Yes, this silly place to but a SECURITY button. If you go in there, click the security button on the bottom of the dialog, you will then see ALL the WORK ITEM related permissions.
- EDIT work items in this node;
- Manage Test plans;
- View this node;
- View work items in this node.
I needed to check all of these to ALLOW.
Again, seems like a stupid place to put these settings, than with all the other security settings via TEAM Project Settings. I hope they had a good reason for that.