Here is where it gets fun.  To have everything fully redundant in the event that a server fails every part of this needs to be mirrored.  I will discuss the various levels of redundancy here.

Namespace

The namespace server holds the metadata for the namespace.  Be sure that this does not depend on a single server.  The data stored here is often small unless you have hundreds or thousands of folders in the namespace, so a dedicated server is not necessarily required for this role as long as the namespace server can always respond quickly to any queries.  The namespace servers can be the same servers as your content if you want.

To create a mirrored copy of the namespace, in the DFS Management tool, right-click on the Namespace and click on "Add Namespace Computer."  Here you can point to an existing share on a different server or create a new share.

Folder Target

DFS masks which server is used for the folder target.  To fully use DFS in this situation, you will need to point to multiple folder targets.  In my situation, I want to have one server always used as long as it is available.  I do not want to hit a random server because there could be data integrity issues.  DFS replication is good, but it does not handle data locking or data write-through.  This means that there could be a delay from when something is written on disk until it has replicated to all other servers.  For that reason, I only want to fail over when absolutely necessary.

To achieve this there are a few things that are necessary.

The failback hot fix mentioned above needs to be installed.

All webfarm nodes need to be running Windows Server 2003 SP1 or later

The caching duration for the folders needs to be changed.  The default is 1800 seconds (30 minutes) which is too long for our situation.  That means that less requests are made to the namespace folder, but it also means that the failback could take up to 30 minutes after the primary server is back online.  You can update this by right-clicking on the folder in "DFS Management," going to properties and then the Referrals tab.  Make sure to do this on each new folder.  You can also change the cache duration on the namespace, but the default is already 300 seconds (5 minutes).

In the Referrals tab of the namespace properties, check the "Clients fail back to preferred targets" checkbox.

In the Referrals tab of the folder properties, check the "Clients fail back to preferred targets" checkbox.

On the properties of the primary folder target, in the Advanced tab, enable "Override referral ordering" and select "First among all targets."

On the properties of the backup folder targets, in the Advanced tab, enable "Override referral ordering" and select "Last among all targets."

Now you have a primary/backup server configuration that will always use the primary server as long as it is available.

Active Directory

The Active Directory part of things is done automatically and apart from the steps mentioned already, does not need any extra configuration.  Just be sure to have redundant domain controllers in your Active Directory environment.