I have a couple of people in a game I am running that have quiet a high initiative score and we are having a slight problem with the way the surprise rule is written in the book. If you achieve a high enough initiative to gain surprise does that mean that the person who you have surprised loses there ability to attack you for the round. Also will that person have a -90 on there defense against you and a -90 on there attack against you assuming that they are indeed allowed to make an action on there turn.

If you beat them based on initiative then yes they will lose the ability to attack you and apply the penalties, if they manage to score well enough for a counterattack that is where they suffer the attack penalty against you. One thing to keep in mind though is that the enemy can anticipate surprise to either negate or at least reduce the penalties (don't have time to check my books at the moment), this does mean that they will go slower in the turn order but it's a fair trade off to not have the surprise penalties constantly applied to them.