Also remember that the umask for netatalk needs to be set. I don't know how to do this for the /home directories though...
Making all home directories 777 really makes me nervous. It might work for a school like Liholiho, but otherwise it is a disaster waiting to happen. We really need to fix netatalk and get a proper ACL filesystem working on your server in order to do the job "right". For now though, I disabled the nightly cron script that "fixes" permissions within /home. Warren