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Problem applying a custom Group Policy

I am having issues with a particular group policy on Server 2008 R2. I
 am logging on to a 2008 Terminal server. The terminal server is in it's own OU, with a loopback GPO and 2 custom GPOs in it. At the user OU level I have a custom user config GPO.
If I have my loopback GPO enabled, my custom user config GPO doesn't apply. With the loopback GPO present, if I go to do a gpresult, the custom GPO is not mentioned at all. It's not in the applied GPO section or the filtered ones.
With the loopback GPO disabled, I just get the custom user GPO (at the user level), and not the other 2 GPOs I have at the Terminal Server Ou level.

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It turned out to be the loopback setting.
It was set to replace. I changed to merge, and it works now.
Taken directly from:
http://support.microsoft.com/?scid=kb%3Ben-us%3B231287&x=14&y=5

The lookback will replace entirely your user GP if it's on Replace mode, that's why it wouldnt be visible at a gpresult query, I think you want to use the Merge mode
Is this a new twist to 2008 as we have a template for TS setups that we have followed in 2000 and 2003 and we used the Replace option for Loopback Processing with them? That is what I usually find as recommended for TS setups in pretty well everything I read.  For instance in this link I just came across they use the 'Replace' function.  https://www.experts-exchange.com/questions/24579654/group-policy-loopback-with-2008-server.html

Is it a matter that it can work with the Replace but we have to change something else?
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Emileneth
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Thanks for the help. We'll work with the merge function if that's what it takes.