Question: How do I create a Group Policy that will prevent my users from accessing specific web-sites? I am at the 2008r2 functional level.

Answer: 
You need to set up an outbound proxy (Threat Management Gateway, Squid, etc) and use Group Policy to force Internet Explorer to pass all traffic though this proxy if it is not in-line. If you make the proxy in-line, then all traffic will, obviously, pass through it regardless of IE settings, making the GPO pointless.

You cannot accomplish this natively though GPO without doing something kludgey like making a hosts file on a network share with the appropriate sites blocked and using the Group Policy Preferences file update setting to push it to computers. I really advise against this. Take the time to set up a proxy and do it the right way.
There's no built in standard way to achieve this using Group Policy.