Checked, and the permissions are set this way. So imho your scenario should work. Unfortunately I can only confirm with the users I shared with tomorrow during work hours as to what permissions they have, but will report back to you if that would help?
I have checked with the users with whom I had shared the folders.
Under the heading Shared with you for user1 appears two folders, TEST-FOLDER and Child_Folder_1. If the user clicks on the TEST-FOLDER, at the top appears the message You do not have permission to create or edit files in this folder, but if user1 navigates from Shared with you > Child_Folder_1 they are able to create and edit files and folders. So, by design, it seems your scenario will work if you set it up the way you do. The difference comes in how the user navigates. I see no reason why this would be different for users and groups.
Maybe if I have the time I will log it to github, as I see a possible feature enhancement here.