Lion Clients 10.7.4 show network accounts are unavailable and server is not responding when binding to Snow Leopard server 10.6.8

Hello,
I am running Snow Leopard Server 10.6.8 and my clients are Lion 10.7.4. While testing I had no issues binding 10.7.4 to our 10.6.8 server's OD. I created a 10.7.4 image to push to all of our machines and in the beginning of last week I was able to push the image and get the machines to bind with OD and apply preferences on these machines through workgroup manager. Towards the end of the week though this stopped working. Now any time I bind a 10.7.4 client to OD it allows me to perform an authenticated bind and the machine shows up in workgroup manager but immediatley after binding the client the status jelly next to the OD server in the directory list is red and says "This server is not responding". If I reboot the client I get a notification that "Network accounts are unavailable" at the login screen. My preferences from workgroup manager are also not applying, which is my main concern because without workgroup manager my mac server is somewhat pointless as we use it for very little else.
I've since tried to bind a snow leopard machine (10.6.8) and this still is working with a green status jelly. I've also built a lion machine from scratch, updated to the 10.7.4 combined update and am still getting the same issue where it shows the server is not responding when binding to OD. I then applied the subsiquent OS update after the 10.7.4 combined update but the problem still persists.
Is anyone else having this issue? Any help would help me keep my sanity.
Thanks,
Dane

Have you had any luck finding a solution to this? The only thing I have found was to unbind and then bind without authentication. Any help with progress on your end would be appreciated!
Nick.

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== QUOTED TEXT BELOW ==
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