rm: cannot determine if this is an ancestor of the current working directory
This is caused by an underlying mount point permission that is too strict (700). You can change the permissions on the mount point without unmounting the volume by using lofs creatively:
#create temp directory
server1> mkdir -m 755 /fix-mnt
# mount the directory which contains the mount point, not the mount point itself, but its parent directory.
server1> mount -F lofs -o nosub /users/zones/server1-z3/root/users/ /fix-mnt
server1> ls -ld /fix-mnt/mountpoint #confirms the permssions are not 775
server1> chmod 775 /fix-mnt/mountpoint
server1> umount /fix-mnt
server1> rmdir /fix-mnt