I have a windows 7 sp1 64 bit laptop that does NOT display the local drives when connected.

Could be group policy (especially if it's only happening to one user). I believe there is a setting to hide local drives in there that could be getting applied to the user.

You could logon as the user and run a gpresults to see if anything like that is getting applied to them.

also maybe the drive is using a drive letter that is currently being used. i would check in Disk management and change the drive letter

Deleted the profile directly on the server (c:\users\xxxxx).  That seems to have fixed the 'local drive' issue; however, am now getting an error message that a 'temp' profile will be created for the user.

Did some more digging into that problem (https://social.technet.microsoft.com/Forums/windowsserver/en-US/2309e2e5-ca3f-499f-856c-395ffa23b8ce/remote-desktop-user-getting-locked-into-a-temp-profile-each-time-she-logs-in?forum=winserverTS).  I looked in the registry (as instructed) but only found the user's key that's related to the roaming profile versus the RDP profile (which I expect to see under c:\users).  

Going through system properties (under advanced tab ->settings -> user profiles) the profile in question is not found.

What am I overlooking?

http://community.spiceworks.com/topic/314982-a-temporary-user-profile-message-when-user-logs-on-to-domain

Take a look at this thread see if anything pops out at you

Specifically richeaston1972 sid key deletion