Link user to home directory after reinstall

[robwales]

I have a partitioned drive with the OS on one partition and the home directories in another. I have just reinstalled Hardy (including reformatting the drive) after having some problems and the main account linked to the home directory with no problems.
When I set up the other users I can't link them to their home folders in the same way.
Initially, when adding the user, (rhonda) I got a message saying that that home directory (/home/rhonda) already exists. I then gave the user a new directory (/home/rhonda2) and then went back in to User maintenance and could change the link back to the original (/home/rhonda) which was accepted.
When I tried to log in as rhonda I received a message;
Users $home/.dmrc is being ignored. This prevetns the default session...
On clicking okay the message:
Your session lasted less than 10 seconds

Details showed:
/etc/gdm/Xsessions: Beginning session setup...
Can't save user-dirs.dirs ... Permission denied

I have checked and changed the permissions in the terminal to read
drwxr-xr-x 39 rhonda rhonda 4096 2008-10-12 15:54 rhonda

but still have the problem.

Any help with this is most appreciated
Rob