I seem to have isolated the issue.
I was using wireless for both server and client, so I switched both to ethernet to eliminate any possible issues there. No change.
Then after some more experimenting I realized my original statement
if I am logged in via any user on the client (network or local), using fast user switching to go to the login screen ALWAYS shows the network users.
was incorrect. It turns out I have to be logged in with a local user for the network users to show up. So I went back and experimented with the Login Window options I configured in Profile Manager. Here is how I had my client configured.
If I enable "Show computer's administrators", or if I disabled "Show local users", the problem goes away. The problem only exists when I have one or the other, but not both, options enabled. So it seems there is a bug on the client, or there is a bug in the profile that Profile Manager is pushing to the client.
Another interesting tid bit. I temporarily changed the local user on the client to an administrator. That left the client with two administrators and no standard users. The problem went away. Turning that user back into a standard user, and the problem came back.
So there's one combination of options here that isn't working. In the long run I won't have any local users anyway, so it won't matter. This only affects me now while I'm migrating things.