Cannot create home folders on the server for network accounts
It might be something with the authentication process of the clients. Open Directory needs to be running on the server (try to delete and rebuild it) and this server must be assigned as a directory server in the the clients account preferences. You might be able to check permissions by accessing the a home folder via CMD-K and the AFP:// URL from the Finder of any client. If you get read/write access then permissions should be okay.