Hi,
There are only a few setting that should be affecting this. I'm going to go through the CLI options, because it just works faster than 100 screen shots and is often more accurate. You can familiarize yourself with the CLI commands in the manpage documentation on the filer or on NOW. 'options' values are also documented there.
1. 'options cifs.ms_snapshot_mode xp' This basically should stay at "xp" unless you have win2000 clients and some other brokenness. Default is "xp"
2. 'options cifs.show_snapshot off' This is the one that is confusing your indexing service and making a big mess of things. The default is off and generally because of the problems it creates (much like you have now) leaving it off is just a good thing. Default is "off"
3. 'vol options <vol_name> nosnapdir off' This works on a volume level to turn off displaying and access to the snapshot directory for clients. Default is off.
Now things should work fine with "Previous Versions" if you just use the defaults. It will also relieve you of your current headaches with luser (local user... not a typo) behaviour. That which has already been indexed may cause a few headaches if users try to access files that are hidden from them now, but... even that should still work with the defaults. The paths are just not visible. Try checking these values through the CLI.
Good Luck.