Sql-server – Set permissions on a view

I've done this a couple of weeks ago - Created LOGIN, ROLE and USER. Added USER to ROLE and granted explicit permissions to the ROLE itself. The advantage in my opinion is, that you can add further users later on without the struggle to grant the permissions, again.

First I created the login:

IF NOT EXISTS 
( 
  SELECT 
    "name" 
  FROM 
    "master"."dbo"."syslogins" 
  WHERE 
    "name" = 'your_login'
)
BEGIN 
  CREATE LOGIN your_login WITH PASSWORD = 'your_password', CHECK_POLICY = OFF; 
END

I've added the CHECK_POLICY param because things are created on user interaction and I'm not able to see, if policies are activated server-sided.

Followed by the user:

IF NOT EXISTS 
( 
  SELECT 
    1 
  FROM 
    "sys"."database_principals" 
  WHERE 
    "name" = N'your_username'
)
BEGIN 
  CREATE USER your_username FOR LOGIN your_login;
END

And the role third:

IF NOT EXISTS 
( 
  SELECT 
    1 
  FROM 
    "sys"."database_principals" 
  WHERE
    "name" = N'your_role_name'  
)
BEGIN
  CREATE ROLE "your_role_name"; 
END

Finally I added the user to the created role:

EXECUTE sp_addrolemember N'your_role_name', N'your_username';

After that, permissions can be set for each type of object, eg

GRANT EXECUTE ON "dbo"."your_sproc" TO your_role_name;

You don't have to add denydatareader or else, if you explicitly grant permissions to the specific objects. Beware that an for example INSERT permission doesn't include the SELECT permission on the same object. ( at least in my case it didn't ;) )

If you have problems executing or selecting from your UDF, check if you have granted all permissions on the referenced objects in the UDF itself!

Update after Cobus' update in OP:

I've executed the queries you provided based on my initial answer, results following:

select * from dbo.testtable 

-- The SELECT permission was denied on the object 'testtable', database 'xyz', schema 'dbo'.

update dbo.testtable set id = 4 where id = 2

-- The SELECT permission was denied on the object 'testtable', database 'xyz', schema 'dbo'. -- The UPDATE permission was denied on the object 'testtable', database 'xyz', schema 'dbo'.

update dbo.testtable set id = 4

-- The INSERT permission was denied on the object 'testtable', database 'xyz', schema 'dbo'.

insert into dbo.testtable (id) values (5)

-- The INSERT permission was denied on the object 'testtable', database 'xyz', schema 'dbo'.

It behaves as intended. Do you have any further permissions granted / set or properties which allow you to access dbo-schema?

This should work (as superuser):

CREATE ROLE rwc;    -- read/write/create user
CREATE SCHEMA foo;
ALTER  SCHEMA foo OWNER TO rwc;
-- GRANT ALL ON SCHEMA foo TO rwc;  -- alternatively

CREATE ROLE r;      -- read user
GRANT USAGE ON SCHEMA foo TO r;

CREATE ROLE rw;     -- read/write user

GRANT r TO rw;
GRANT rw TO rwc;

ALTER DEFAULT PRIVILEGES FOR ROLE rwc IN SCHEMA foo GRANT SELECT ON TABLES TO r;
ALTER DEFAULT PRIVILEGES FOR ROLE rwc IN SCHEMA foo GRANT USAGE ON SEQUENCES TO r;

ALTER DEFAULT PRIVILEGES FOR ROLE rwc IN SCHEMA foo
GRANT INSERT, UPDATE, DELETE ON TABLES TO rw;
ALTER DEFAULT PRIVILEGES FOR ROLE rwc IN SCHEMA foo
GRANT SELECT, UPDATE ON SEQUENCES TO rw;

You probably missed one of these steps.
You may need do adjust existing objects additionally since default privileges are only granted to new objects.