How can I assign only certain printers to users

There are two way to do it:
1st - log in script.  Create a vbs script and then add those script into the log on for each gpo.
2nd - under GPO, under Windows Setting there is an option for Printer Deploy.  You can add printers you allow for that group in that list.

 I haven't try the second way coz my work place use vbscript for printer.

If you are using Print Server,

You can setup Permission on printer too, to restrict who can print to some specific printer.

You can setup a few machines, Running XP is fine. and each one of them to manage printers for different department.

When someone ask for adding printer, you can just gave them the machine that manage his/her department's printer, then s/he can see only those printers in their department.

That was my next question and that may be the best solution. We have about 20 printers on the Terminal server now.  I only want the departments to see the printers assigned to that department..
Can the VB Script or GP accomplish that?

I know that you can write a Batch file (.bat) for adding printers.

here might be do-able, still you your server to manage all the printers. but hide them all from the directory. so no one can see any of the printer.

Then you can get different batch files for different departments. let say a batch file for finance, and a batch file for legal. which add finance and legal printers accordingly.
 
Someone from Finance want to add some printers, send them the finance batch file. then they can add only those finance printers. same with legal people want their printer installed.

Again, it would be better to setup the permission on printers too. just in case for some smart guys who can see the setting from the server, but they still can't add them for printing.

I am not sure if GPO can do the job. since I don't know GPO that well.

Have you looked at Group Policy with windows 2008 server you can set default printers in broup policy.

I haven't looked at GP too deep, but I may be able to create a policy for each department and then set default printers in the policy for each department. I will try that tomorrow. I'll leave this thread open for the night  for further input. I will look at the GPO in the morning. Thanks for the input so far.  I would like to do it in the GPO if is possible.

vbs can do   that.

It allow you to add a certain printers to a group and assign a default printer as well.
Like I told you before, my workplace still using vbs.

If you need one, I can copy the code up here for you.

Enzoqoy,
That would be great. I would like to see the code.

Thanks,
I'll give this a go tomorrow.

Thanks.  Good luck.  
I'll be around if you need help with it.