MacOS – OS X Server network sync issues

I've been running an Open Directory environment for over a year now, and this issue has never, ever stopped plaguing my network. Users constantly have syncing errors, seemingly due to permissions issues. In this case its an iTunes file, but it has been anything from an .xls on the desktop, to items in the library.

Does anyone have an idea on how to resolve this issue?

Right now the only way I can get rid of the sync issue is to log into the server (running the latest Mountain Lion with OS X Server), navigate to the home folder of the particular user, and delete the file myself.

This is obviously an awful experience now that we are growing in terms of users 🙁

At a basic level, we're using an OD setup via Server.app and tuned with Workgroup Manager.

The hardware is a Mac Mini (Mid 2011):

Processor:2.3 GHz Intel i5
Memory:   8 GB 1333 DDR3
Software: OS X 10.8.3 (12D78)
Server App: 2.2.1 (12T162)

# of Users varies between 2-6

Client Machines

Mid 2011 iMacs
2.5 GHz i5
4 GB 1333 DDR3
OS X Lion 10.7.5 (11G63)

Server Error:

Server log error: May 21 12:06:26 server.name.com sshd[20492]: Authentication refused: bad ownership or modes for directory /Users/nickrossi/Library/FileSync

Server log error: May 21 12:06:26 server.name.com sshd[20492]: Authentication refused: bad ownership or modes for directory /Users/nickrossi/Library/FileSync

Server log error: May 21 11:52:41 server.name.com sshd[19924]: Authentication refused: bad ownership or modes for directory /Users/brockmantella/Library/FileSync
    swupdateServiceLog = "/var/log/swupd/swupd_syncd_log";