Terminal Server capacity

When you say it is rejecting, could you be more specific.  Could it be possible it is rejecting due to available TS licenses?  Is there a cap specified in the number of users on the properties on the connection in the TS Configuration console.  Also, when the server hit 40-50 users, how much ram and cpu utilization are you seeing.  Finally, are you having users log in with full desktops or are we talking exported applications?

Most people that I have discussed TS with agree that TS really seems to cap out around 60-80 users and that after that a more specific environment like Citrix seems to work best.  However, a lot of it depends on what the users are using.  If we have 70 users using Outlok we have some very serious memory usage. :)

No limit has been set for the users in the TS configuration console, they hit a load balanced cluster via round robin.
They are using full desktops with a full compliment of the latest Office products.

memory usage is about 3 gigs out of an availalbe 8 gigs of physical memory,
proccessor is between 10 and 15%

I don't see errors for TS licenses, in event viewer.

The errors I see are 1500 errors, e.g:
  DETAIL - Insufficient system resources exist to complete the requested service.
  Windows cannot log you on because your profile cannot be loaded.
  Check that you are connected to the network or that your network is functioning
  correctly.  If this problem persists contact your network administrator.

...where the above 1500 error does not make since given plenty of available systems resources.

OK Thanks!
I'll try maxing out the logins and configuring office.
, also, wondering if it could be printer drivers - we basically install what ever the hell the user wants - 1 gig of drivers dosn't seem right.