Ok, so my XP clients work just fine. However, my Windows 7 systems cannot sync offline files. When I right click on the folders, there is no option to allow offline files. My share is mapped at logon (i.e. \\fs\users$\username). Why can I not sync these folders??

Check the server side for an option called Offline Settings. Click on Caching to configure the off-line file settings. This will invoke the Offline Settings dialog where a number of options are available including allowing each user to specify which files they would like to be able to access off-line, only having files that users actually access available off-line and disabling off-line sharing all together

Yep, that worked.