Excel lock / Notify feature malfunctioning

At our workplace we have a master Excel workbook that accessed daily by sales
personnel. Each person has to make entries that they responsible for. Once
entries
are completed, the Excel workbook is printed and passed on to a production
personnel.
It is absolutely crucial that Workbook is audited by one person only at the
time.
Here is the problem:
Note that a Share for the workbook is disabled.
Scenario #1:
Person A has a file opened for editing. Person B tries to open a file and
gets a message that the file is locked for editing by a person A and is given
a choice to open file in read only or use Notify option, just like it is
supposed to be. Person B chooses Notify.
Person C tries to access the file, gets the same message and chooses Notify.
Then after the file gets unlocked (Person A is done), person C gets in to the
file before B. Then person B tries to open the file and is successful without
any messages. Person B then starts making changes but those changes are not
saved.

Scenario #2:
Person A tries to open a file and gets a message that the file is locked for
editing by person A ……..HIMSELF!
Note that 5 or more people can try access the file at the same time.
To make it simpler, it looks like the feature Lock/Notify is not working
properly.
Apparently we did not have this issue when we had server 2000. Presently we
are running server 2003 with VSS enable (if VSS has to do anything with that).
This is a big issue for us because it does create a mess. People are making
changes thinking that changes are saved, however they are not, and so on.
We have to make sure that the file is audited by one person at the time only.
Please, any ideas?