Assuming \\fs1\homes has a list of your current users there, with the documents etc happily showing, have you tried setting Target Folder location in the Documents Folder Redirection to "Create a folder for each user under the root path" as suggested by KMount earlier in the thread?
As my fellow Swindon Tech suggests, try putting the %username% value into the AD path on a test account with your current Target folder setting and see what the event log shows

