FIXED!!!
I called Apple Support and a guy named John helped me solve the problem. Coolest guy ever. He told me that Profile Manager depends on DNS and Open Directory for it to work properly. You need to configure DNS correctly the first time before enabling Profile Manager in Server app, otherwise you will need to reinstall the OS and start from scratch. My problem was that my DNS server was on a different subnet, so what I had to do was reinstall the OS, then have the server machine point to itself for DNS (127.0.0.1).
These steps are all for memory, so Im not sure if they're in perfect chronological order but they should at least lead you in the right direction. Feel free to add steps if you find anything missing:
1) reinstall the OS on my server machine (10.8).
2) perform a software update (unless your OS version is already 10.8.2).
3) download Server app from the Mac App Store.
4) open Server app and click on DNS in the sidebar at the left, turn it on.
5) go back to the sidebar and click on the name of your server at the top, then select the Network tab.
6) edit the host name and make sure its set to its domain name, ex. "myserver.com" if you have one.
7) open System Preferences > Network. Your DNS Server should say 127.0.0.1
8) check if you configured everything correctly by opening terminal and running sudo changeip -checkhostname, you should be able to see your primary IP, current hostname, DNS hostname, and it should say "success" at the end.
9) then run host myserver.com (using your servers domain name), see if it points to the correct IP address.
10) then run host server_ip_address (using your servers IP), see it points to the correct domain name.
9) if all showed successful, you can start setting up Profile Manager and the apps should now show up in the dock preferences payload.
**REMEMBER that the clients you manage all need to point to your servers domain for DNS (the one you just set up).
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Hope this helps!