Thanks for your reply.
I am using 'administrator' for the main user, 'default' for the template user, and then logging in as root to run the script.
The error seems to occur in any application that attempts to use the login keychain. We have students using their Active Directory account to log into the system and it asks them to reset to defaults and input a password for the keychain, which our older (10.7) systems were not doing. On those systems, they just log in and it would auto-create a new login keychain for them with their AD password.
Edit: It seems to work fine on 10.10.2. I am updating to 10.10.3 to see if I can replicate the issue.
Edit 2: Updated to 10.10.3 and redid the template, seems to be working fine. Not sure where the issue was before. However, it seems to be copying the profile over from the 'administrator' user instead of the 'default' user I have set up, unsure if that is how it is supposed to work, but users can log in without issue now so it's not too big of a deal. Thanks!