In Server Admin, the Local option was used to indicate that the user has a Home directory that resides on the server that Server Admin is being used to administer. The correct share point was selected, and the user's Home directory was accessible by other clients that were bound to the same Directory Service, typically NetInfo or LDAP.
In Workgroup Manager, the Local option is used to indicate the Home directory is local to the server. It is not available to clients bound to the same directory service. This is for users that log in using the local console for the server.
To achieve the same result as Server Admin's definition of Local in Workgroup Manager, the Network option must be used. For more detailed information, refer to pages 161 through 164 of the Mac OS X Server Administrator's Guide. It is located on the server in /Library/Documents/MacOSXServer.