Target Application now recognizing a security group

Does anybody know why I cannot add a security group as a member of a Target Application:

The group is found using the people picker:

But then clicking "OK", SharePoint complains that the user can't be found:

It's almost as if this people picker window can't find Groups. I'm double sure the groups exist, and that they are "Security" groups, but yet, when I plug any group name into this people picker window, it can't seem to find it.

Anybody know what I'm doing wrong?

Thanks! -Russ