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i just installed a new version of osx on my server and updaded to 10.2.1 just after the install with the effect, that i cannot use or activate the passord server. it seems, that workgroup manager has troubles with the new os release.
It has been well documented that 10.2.1 Server is very, very buggy and I believe that Workgroup Manager would be at the top of the list. OS X Server went from useable to unuseable over night. I would not recommend upgrading until Apple addresses the many issues plaguing this release.