Hi jeagly,
I'm not too versed in the arts of all of SharePoints web service methods, but I think you are on the right track. You probably are downloading the Collection of users, and then you have to use that information to download from a filtered list of actual users. You will have to consult the SharePoint SDK to make sure - good luck!
Matt Faus / Microsoft InfoPath MVPQdabra® Software / Streamline data gathering to turn process into knowledge