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Mac Server X Proxy Config

We have 70 windows users and 5 Mac OS X users. I am trying to configure our Auto-Proxy URL for our Mac users. I followed these directions, which make total sense:

It's real easy to set all your Macs to use a proxy server. It's called Open Directory in OS X Server. Using Workgroup Manager > Computer Groups > Selected Group > Preferences > Network > Proxies. Check "Always", Check your preferred Proxy and click apply.

My challenge, is an error; which i believe is somehow related to our Windows Active Directory:

"the directory system schema does not support storing managed desktop settings"

Do i need to recreate my AD groups in OD and apply the network policy there? Thanks for the help!
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