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How about having each user create his own mxd using their own version of the layer you want to use Editor Tracking on? This should at least solve the problem of only joe being tracked. Make sure that the layer with joe's version is not copied into any of these new mxds because it would be carrying his credentials along.
The behavior that you were observing is actually correct!!
When Joe resourced the MXD, he must have used his connection (connected as user 'Joe')....the MXD stores this user information along with other connection parameters...
The correct way would be for each user to create their own connections with their username/password and then resource their individual MXDs to point to these new connections (which I guess you already figured out).
Regards,