There are several issues.
The AD users folder need to be create manually
The Unix permissions need to be set on the folder
The AD ACLs need to be set on the folder.
Try these settings with a test user:
The DOMAIN\user may have to be done as firstname.lastname@example.org in 10.5.
chmod +a "DOMAIN\test04 allow list,add_file,search,delete,add_subdirectory,delete_child,readattr,writeattr,readextattr,writeextattr,readsecurity,file_inherit,directory_inherit" /Volumes/RAID/Shares/Users/Students/04/test04
cp -r /System/Library/User\ Template//English.lproj/ /Volumes/RAID/Shares/Users/Students/04/test04/
chown -R test04:administrator /Volumes/RAID/Shares/Users/Students/04/test04/
chmod -R ug+rwx /Volumes/RAID/Shares/Users/Students/04/test04/
You can probably skip copying the default profile, 10.5 is less prone to crashing without the default folders.