I have had success by modifying the SMB server prefs. Why Apple took this out of the GUI in Server app I don't know. But the plist files tell all.
This is working for two different setups so far.
1) Lion Server SMB sharing where the server is an Open Directory Replica of a Lion Server Open Directory Master
2) Lion Server SMB sharing where this Lion server is merely bound to a Snow Leopard Server's Open Directory Master
The smb server prefs file is located at:
/Library/Preferences/SystemConfiguration/com.apple.smb.server
I opened it up in TextWrangler (with Command Line Tools installed) and added the following (which were not already there):
<key>AllowKerberosAuth</key>
<true/>
<key>AllowNTLM2Auth</key>
<true/>
<key>KerberosRealm</key>
<string>USETHEEXACTSAMESTRINGASTHELOCALKERBEROSREALM</string>
<key>Workgroup</key>
<string>Workgroup</string>
You can do it in command line if you like using methods similar to what is stated in Apple Tech Note: HT5038
http://support.apple.com/kb/HT5038
sudo defaults write /Library/Preferences/SystemConfiguration/com.apple.smb.server AllowKerberosAuth -bool YES
sudo defaults write /Library/Preferences/SystemConfiguration/com.apple.smb.server AllowNTLM2Auth -bool YES
sudo defaults write /Library/Preferences/SystemConfiguration/com.apple.smb.server KerberosRealm -string USETHEEXACTSAMESTRINGASTHELOCALKERBEROSREALM
sudo defaults write /Library/Preferences/SystemConfiguration/com.apple.smb.server Workgroup -string Workgroup
When you have completed the changes just stop the FileSharing in Server app and then start it up again.
Presto. Windows XP and Windows 7 can log in:
\\ServerName\ShareName
name: UserName or ODMASTERNAME\UserName (With Lion 10.7.2 you should only need the UserName
password: password