iCal - "Add a Mac OS X server account" fails

Hi all. I have finally got networked users working on my Lion Server environment however have hit a stumbling block with getting a shared iCal environment up and running. I have setup the iCal service to be on in Server.app however receive an error when trying to set up an account. Here are the steps I take.

1. Login as a user (have tried local administrators, network administrators and network users on both the server and clients).

2. System Preferences.

3. Mail, Contacts & Calendars.

4. Add Account - Other.

5. Add a Mac OS X server account, Create.

6. Select the Lion Server, Continue.

7. Have tried combinations of Full Name, Username and Password for different users.

8. When I click Setup it comes back with a message saying "Unable to verify user credentials".

There is the following entry in the console, but no other information available:

9/10/11 11:47:48.779 PM System Preferences: The operation couldn’t be completed. (kCFStreamErrorDomainHTTP error 404.)

I have googled everywhere and am out of ideas, does anyone have any suggestions please? Not even sure where to look next...

Thanks.