I have had a look in 10.7.4 too. It does not work there either.
It appears that the AD connector in Lion presents a value for the NFSHomeDirectory attribute as /Users/username even if the the box for force home folder in the AD Connector is unticked. Augmented User records will not replace the value of an attribute that it is delivered from else where (in this case the AD Connector) therefore the NFSHomeDirectory value in the Augmented record is not read by the client machine.
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