> Martin, do you concur?

Not really. On my system, which is part of a domain, expanduser("~")
gives 'C:\\Documents and Settings\\martin.vonloewis', which is
indeed the directory where my profile lives. HOMEDRIVE is Y:,
and HOMESHARE is some system in our network, but those aren't
considered for determining ~ - although I do think
%HOMEDRIVE%\%HOMEPATH% might have been a better choice.
However, given the choice that was made, I think the assumption
is correct that somebody else's profile will live in the same
folder. Is it possible to configure a domain profile so that it's
not in Documents and Settings?

Even if this doesn't work for all systems, I don't think we can
revert it for 2.6.1 (as it does give the correct answer at least
in some cases). Such a change will have to wait for 2.7.