"Network accounts are unavailable" when logging into OS X Lion (Open Directory on localhost)
It's possible that the server has service ACLs enabled for the Login Window. If you can connect to the server using Server Admin (from another Mac on the LAN - as you have with WGM), you may be able examine those settings. Here's an article that details enabling that setting for Mail (applies to Login Window as well.)

Go into Server Admin -> servername.local ... Select the "Access" tab at the top of the window, and confirm that you are not managing service access for the "Login Window" section. If you are ("Allow only users and groups below"), you can potentially correct the list of users that have access in that window, or choose to "Allow all users and groups".

Also - Apple does not recommend logging into network user accounts directly on the server (at the Login Window.)