Lion Server not able to set Open Directory user account to store home directory on server
I was able to figure this out a while ago, but I realized I only posted the answer to my question on Serverfault. Here's the solution for this:

I ended up setting up Lion Server at my house, creating an Open Directory user with a remote home directory, and looking in the Directory Utility to see what the actual keys were set as. I was then able to use Directory Utility on the client's computer to set the keys manually and it worked perfectly.

Here are the keys you need to set assuming the server's hostname is server, and the directory is /Users/test on the server:

key: HomeDirectory

val: &lt;home_dir&gt;&lt;url&gt;afp://server/Users&lt;/url&gt;&lt;path&gt;test&lt;/path&gt;&lt;/home_dir&gt;

key: NFSHomeDirectory

val: /Network/Servers/server/Users/test