I can confirm this, too. What was really annoying, was that I had just
added a dozen students to the Edubuntu server, and then poof... gone.
What is weird is that I did notice that it created unique groups for
each user (I had not assigned them to a single group). But no entries
were created in passwd or shadow files, just group. And all entries have
a valid shell. Everything was working in Gutsy before I upgraded. I did
manage to add the users via Webmin though.

** Attachment added: "UsersConfig.out"
   http://launchpadlibrarian.net/14053263/UsersConfig.out

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users-admin won't add or delete users
https://bugs.launchpad.net/bugs/220697
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