You could create your Git repo with:
- the working tree being a current path on the local disk partition
- but the .gitdir being specified with--git-dir=<path>or$GIT_DIRenvironment variable and referring to a path within your (backed-up) home directory.
The git init command takes into account the $GIT_DIR environment variable:
If the $GIT_DIR environment variable is set then it specifies a path to use instead of ./.git for the base of the repository.
Alternatively, you can create your repo in your home dir, but add the following git config:
core.worktree
Set the path to the root of the work tree.
  This can be overridden by the GIT_WORK_TREE environment variable and the --work-tree command line option.
  It can be an absolute path or a relative path to the .git directory, either specified by --git-dir or GIT_DIR, or automatically discovered.
  If --git-dir or GIT_DIR are specified but none of --work-tree, GIT_WORK_TREE and core.worktree is specified, the current working directory is regarded as the root of the work tree.
Note that this variable is honored even when set in a configuration file in a ".git" subdirectory of a directory, and its value differs from the latter directory (e.g. "/path/to/.git/config" has core.worktree set to "/different/path"), which is most likely a misconfiguration.
  Running git commands in "/path/to" directory will still use "/different/path" as the root of the work tree and can cause great confusion to the users.
The OP adds:
Could it be as simple as creating a .git symbolic link in the local partition to the .git directory in the remote NFS partition?
At least, with settings (like git-dir, or core.worktree), that allows to achieve the same effect without relying on the OS specific features like symbolic link (which is not available on every OS)
Update 2018 (8 years later): Tom Russell adds in the comments:
It appears that the --separate-git-dir flag is now used to point to .git/ on the NFS server when initializing the repository on the local workstation (NFS client).
  Subsequent behavior is odd, though: Changes committed on the NFS client don't automatically propagate to the server, requiring a git checkout -- <file> on the server.
I subsequently figured out that a git reset --hard in the server repo after a commit in the client repo (or vice-versa) is the easiest way to bring a working directory up to date.