The executable program that this service is configured to run in does not implement this service

Check the logon type of the Terminal Services service.....
Make sure it is set to Local System Account

Also, do you have Fast user switching service running?

Also, under the following value in the registry...

HKEY_LOCAL_MACHINE\SYSTEM\CurrentControlSet\Services\TermService

Does the "imagepath" value equal

%SystemRoot%\System32\svchost -k DComLaunch

?

Check the registry value first.....

regvalue is "%SystemRoot%\System32\svchost -k DComLaunch" so seems to be correct.

i do not have fast user switching serivce running, it's a dependency service of terminal services.
service is logging in under system account.

Under that same Termservice key, whats listed under
DependOnService  ?

DependOnService  = RPCSS.

Wierd....

What if you changed the logon type to YOUR local user account?

and what does %systemroot% point you to when you paste it into a run command?

system root points to c:\windows
changing to local account does not help.
local administrator is also not working....

I am sorry, I dont have any other ideas....
Actually, I just lied to you.....Sorry...  :)

Try a system File Checker...Youll need your CD or cabs....

start>run>sfc /scannow

Any recent windows updates lately as well?