"The local policy of this system does not permit you to logon interactively."
Symptoms: When trying to connect to a W2K domain controller running Terminal Services with Application Server mode for user access, you as a TS user may receive "The local policy of this system does not permit you to logon interactively" message. You may not receive this message if you logon with a member of the following default groups:
Account Operators
Administrators
Backup Operators
Print Operators
Server Operators
Others based on services on the computer such as TsInternetUser
Also, you will not receive this message when you logon member and stand-alone servers since they have the users group included in the "Log on Locally" user right.
Resolutions:This issue occurs because the W2K domain controller running Terminal Services does not have the Users, Authenticated Users, or Everyone global group added to the Group Policy Object for the "Log on Locally" user right. "Log on Locally" is a required user right in Microsoft Windows NT 4.0, Terminal Server Edition and Windows 2000 Terminal Services. To modify the Group Policy Object for the domain controller, go to Administrative Tools>Domain Controller Security Policy>Security Settings>Local Policies>User Rights Assignment>Policy>Log on Locally>Add>Browse, click the appropriate group, and then click Add. After modifying the Group Policy, type secedit /refreshpolicy machine_policy /enforce at a command prompt, press ENTER, and then press ENTER.