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TS 2008 Client error "the requested session access is denied" from thin client, works with vista

I am trying to configure a brand new terminal server, have all of the services setup on a single server and can connect fine as an admin. But any user that is not a domain admin gets an error message that says "the requested session access is denied" BUT only when I am going in from a WYSE terminal. As an admin I can use the WYSE terminal no problems. If I use a windows Vista desktop I can login to Terminal services with the standard user account no problem. So this has to do with the method that the user is connecting to TS, and also what user permissions they have.

I have verified that the user is a member of the remote desktop users, I even manually added the user to the allow login locally, allow logon to terminal services, remote desktop users etc.

This server is NOT a domain controller, has the licensing server installed on itself, but does not have any licenses actually installed. Originally I had left the licensing unconfigured because of the 120 days you have, but after having these issues I did choose to do device licensing, to no avail.

I want to make sure this setup will do what I need it to do before I purchase any licenses. Do I need to buy licenses to allow normal users to access the server or do I have the 120 days? Or maybe I need to deactivate the licensing server utnil I have  valid licenses, or maybe the licensing doesn't have anything to do with my above issues.

Anyone have any ideas? Thanks
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tilbard
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I started seeing the same thing on a newly installed TS as well. Monday it was working just fine, Tuesday I installed the updates Microsoft just put out, Wednesday non-local admins can't login using anything other than MS RDC 6 client (I use Royal TS normally). Local Admins can log in using any client.

I double-checked the TS config, and the updates didn't turn NLA back on or anything.  Encryption is set to Client Compatible and Security Layer to negotiate.

Just thought I'd add that as it seems we're having similar problems.
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Do you have any idea which patch caused the issue, without any kb numbers they will want my credit card info if I call them.
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That is correct.  The reason for this in general is using Console Mode will try to connect to an idle session from the same user logon or will disconnect any existing sessions of non-admin users when logging in as a domain admin / as a server local admin.  Since a non-admin can't cancel existing sessions of logged on users, you get this error message.
Windows 7 Remote Desktops plugin also has an option to select: Connect with /admin option. This is checked by default and also results in this error.