In previous versions of Mac OS X Server one could share network home directories (for use with network login accounts) via either AFP or NFS. Due to the way such shares are mounted by the client machine if you used AFP, then only the first network login from a client machine would work as the mount is then 'owned' by that user. This is why you could not use 'Fast User Switching' with network logins.
However NFS is mounted very differently and ends up looking not like a network share but part of the local file-system. In effect it is not owned by the user triggering the login and this means subsquent logins are not blocked. The contents of the path still have their normal permissions so you cannot access someone else's files.
Normally, AFP is fine however there are two scenarios that it is not. Firstly, if you are using either iRAPP Terminal Server, or AquaConnect Terminal Server. These allow multiple users to login and run applications on the Terminal Server. If you have the user home directories on the same server you are ok, if however you are using another server to shared those home directories as network home directories, then you would hit the AFP problem. Therefore AquaConnect specifically mention this in their manual and suggest using NFS instead.
Unfortunately, Lion Server now only allows setting up AFP for sharing network home directories - there are no other choices listed in the Server.app (Server Admin now has no file sharing options at all).
Note: It is still possible to run NFS on a Lion Server.
Even if you ensure NFS is running, and even if you manually setup sharing the users home directories you cannot set this up as an Open Directory auto-mount for home directories. This would therefore seem to make it impossible to use network home directories with a Terminal Server.
There is a second reason why using NFS rather than AFP has been very useful. Some applications are poorly written and do not work properly with AFP shared network home directories - Adobe are particularly bad. I found after switching to using NFS (to allow using a Terminal Server with Snow Leopard Server) that this had the unexpected but welcome side effect of allowing many of these misbehaving applications to work without errors.
So, does anyone know of a way to setup NFS shared network home directories in Lion Server? Obviously one could mix Lion and Snow Leopard servers but I am asking if this can be done with just Lion servers.