Windows

DO THIS ON THE SERVER
Copy the file called ntrights.exe to you c:\winnt\system32 folder, then at a command prompt type the following.

ntrights ?m \\computername +u everyone +r SeInteractiveLogonRight

example your server name is win2003
ntrights -m \\win2003 +u user1 or everyone +r

The ntrights file can be found on the windows 2003 resource kit, if you do not have it go to

http://www.microsoft.com/downloads/details.aspx?familyid=9d467a69-57ff-4ae7-96ee-b18c4790cffd&displaylang=en

or goto google and type in download ntrights.exe and the first link is microsoft

Have fun

I believe that Win2k3 works the same was as Win2K does with TS.
Did you set up TS on the server in Remote Administration mode, or in Application mode?
For normal users to use TS, it needs to be in Application mode. The other mode is for Administrator-level access only. Only Administrators could log into TS that way.

The answer I had given you works, Try it again. I have tested this time and time again. This will solve your problem.

With the 3 users you created make sure you gave them "allow logon to terminal server." Double click on the user you created and click "terminal services profile" tab and click the check box "allow logon to terminal server." This is the option you are missing.