We have problems on our network if a DHCP server goes down, the workstations
use a locally-generated address (using APIPA). The PC then can't find the
tree (as it's IP address doesn't match the network), and the user just
reports that they can't login.

Some help pages have suggested globally disabling APIPA on the workstations.
Has anyone else tried this? Are there any problems in doing so?

This applies to Windows 2000 and XP workstations and is documented in the
following MS note:
Change in DHCP Client Behavior in Windows 2000