Set roaming profile path setting problem; is it a bug?

All,
We have set the following path for "Set profile path for all users logging
onto this computer" to:
\\servername\sharename\%USERNAME%.%USERDOMAIN%
(Computer Config\Policies\Windows Settings\Administrative
Templates\System\User Profiles)

The computer account object is in NAU-STUDENTS. Users can logon from 2
domains NAU-STUDENTS or NAU.
All users get profile saved to:
\\servername\sharename\\%USERNAME%.NAU-STUDENTS, regardless of there
originating domain.
The problem is that we have users with same user name in both domains: eg
NAU\plg9 & NAU-STUDENTS\plg9.
Whoever logs on first get roaming profile created, the second user get a
profile service error and cannot logon.

If I skip the .%USERDOMAIN% in the path same problem - profile created for
first user \\servername\sharename\\%USERNAME% (no mention of domain in
path), user with same username from second domain cannot log on.
Anyone know why this doesn't work?
Is it by design or is it a bug? No guesses please - an MSFT answer would be
helpful.

I would have thought that it should correctly honor this environment
variable?
This is with 2008 native domains and Windows 7 RTM Enterprise clients.

Strangely this setting works correctly, with only a base:
Windows Components/Terminal Services/Terminal Server/Profiles
Set path for TS Roaming User Profile
Profile path \\servername\sharename
This policy setting correctly appends %USERNAME%.%USERDOMAIN%  to path
without need to specify.
Thanks,
Pete Gomersall