A new KB article was recently released regarding the creation of local groups (and users) using Group Policy Preferences.
“…Create a Group Policy Preference Setting for "Local User and Groups"
Computer Configuration => Preferences => Control Panel Settings => Local User and Groups New => Group
In the "Group name" edit field, it is not possible to enter a Group/Username longer than the displayed field.
The "Group name" edit field does not allow to scroll the content, so the length is limited by the visible length of the field…”
I personally never noticed this before, but did some quick testing on Windows Server 2008 R2, the limit seems to be 32 characters. This has been fixed in Windows Server 2012.
Source and suggested workarounds: