We've just upgraded to Z7, and have all Netware 6.5 servers.

After the upgrade we:

1. Created a new staff policy package at the root
2. Created a new group in each container
3. Put all users from the container in that group
4. Associated each group with the policy package

The DLU does not have the login restrictions checked, however greyed out and checked below it is "Restrict unregistered workstation"

We have some machines that will not create a new user nor allow a existing user to login. Its not every machine, maybe 1 in 50, and its in more than one container.