You may have done this stuff, but I'm not making assumptions...
In the Server.app, you should be using Open Directory. I forget the exactnenu item name because it goes away after you set it up... but I think it's something like "Manage Network Accounts" I believe it's under the Manage menu. This willl configure your server as an Open LDAP server.
If you havn't done this step you do not have usable network accounts or gorups, so delete your local accounts.
Once you're an LDAP server creating accounts in Server app creates LDAP accounts. You'll know this by a little blue ball at the bottom-right of the user or group name's icon.
Right-click and select "Edit User" on the "Home Folder" Option select the "Users" Share versus "Local Only" (Verify, by right-clicking the user again, and selecting "Advanced Options" for Home Directory here, it should look like /Network/Servers/<YOUR_SERVER_NAME>/Users... not /Volumes/Users
Now to answer your question.
To create your users home directory, simply login TO THE SERVER as the new user. It will do the creation.
Next thing to condsider, Use Workgroup manager to configure the "Mobility" preferences of your Kids Group to use "Mobile accounts" Mobile accounts create local copies of the home directories on the client workstation The trade-off is Mobile accounts add overhead of copying back-and-forth, but they can still use the account if the machine is not connected to your server. (i.e. laptop on the road...)
