This is typically left for Active Directory, not Group Policy. If you use Active Directory Users and Computers to configure the users' home directories, the correct folder and permissions will be automatically generated. To do this, follow these steps:
1) Create a shared folder on a server and name it HomeDirs (can be anything, just name it logically). Now, you will have a folder for each user under the HomeDirs shared folder. Each folder has the user in control of the contents and has the permissions you want.
2) Set the shared perms on the HomeDirs shared folder to have Full Control access, allowing the new folders to be created.
3) Open up Active Directory Users and Computers and do a multi-select on the users that need to have a home directory under this shared folder.
4) Select Properties after right-clicking on the multi-selected users.
5) Select the Profile tab.
6) Check the Home folder check box.
7) Select the Connect radio button.
8) Select a drive letter for the home directories.
10) Select 'OK'.
Now, you will have a folder for each user under the HomeDirs shared folder. Each folder has the user in control of the contents and has the permissions you want.
This was first published in August 2005