Kay, I resolved it myself.

Found answer here: http://stackoverflow.com/a/1211868

Basically, since the cookie is being set on a different server it's view as a third party cookie, which is generally blocked by IE default settings. Adding this line to setcookie.php corrected the issue:

Code:
header('P3P:CP="IDC DSP COR ADM DEVi TAIi PSA PSD IVAi IVDi CONi HIS OUR IND CNT"');