pass through authentication server 2008 RDS

I have a pretty big host server running HyperV.  On that server I have a guest server 2008 running RDS.  On the RDS server I have an application loaded that will be used by about 50 people on the back office (LAN).
 
All of my workstations are XP SP3.  When I configure a workstation to use the application on the RDS server it consistently requires the user to log into the RDS server. The credentials for the RDS server are the same as the XP workstation logon.  My reading makes me believe the workstation logon credentials can be passed to the RDS server thereby eliminating the additional login.  
 
I do not have this problem at another location but that location uses Server 2003 Terminal Services.  It does not require the user to log into that server.  
infranetsupportAsked:
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Darius GhassemConnect With a Mentor Commented:
Gotcha. I don't remember to be honest with you I will have to look
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Darius GhassemCommented:
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infranetsupportAuthor Commented:
Im seeing in the comments that xp sp3 is not supported with server 2008 term services...is this correct?
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Darius GhassemCommented:
XP SP3 is supported
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infranetsupportAuthor Commented:
I meant not supported for SSO.  I have followed this article with no luck on the xp sp3 machines
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