Your comments indicate that the machine was a 10.5.6 client before you upgraded to server?
If you have an OSX 10.5 client and “blow away” the Local KDC without deleting the KDC items in the system keychain, the same KDC will be re-created each time you think you are creating a fresh KDC. Since you started with client and upgraded to server, you probably have the original KDC which may be conflicting with the DirectoryServices Kerberos integration.
I would recommend starting from scratch: reformat the hard drive, install ONLY server, run all outstanding OS updates before configuring OD and Kerberos.
Trying to “clean up” the problem may work, but it is a little complex and the outcome is uncertain.
You’ll get better results with a fresh installation, properly configured.
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