OS X Lion not able to login with regular open directory domain users
I'm guessing from your tags this is a 10.5 Server with 10.7 clients? 

In your Open Directory user configuration/preferences are you using portable home folders? (With the user in question selected in Workgroup Manager, choose the Preferences button and check the "Mobility" section)

If so (and even if not!), check that your users have a Home path set in Workgroup Manager -> Accounts -> testuser -> Home tab. Usually the diradmin default home is set to /var but for other users I've seen it default to (None) which causes the login window to just shake and reject the user when trying to log in on a client system, probably because the system doesn't know where to create their home folder.

Try a test where you set testuser's Home location to /Users/testuser by clicking the + in the Home tab of WGM and entering /Users/testuser under the Full Path: field (I'm basing this wording off a 10.6 server but I recall 10.4 to 10.6 being all quite similar.)

Good luck!!