Windows XP and PeopleSoft

We run a Win 2000 network with active directory, plus PeopleSoft. The problem is with Windows XP workstations that run PeopleSoft some reports come back with a C:\temp\spr.log error no such directory found or something to that effect. We run SQL7 client. It acts like there is no C:\temp directory, the user is administrator of the local computer, so there cannot be a permissions issue. We have tried the suggestions on the PeopleSoft support sight. We have tried to configure the Envrionment Variables, there was an entry in the registry that PeopleSoft wanted us to delete. But still no fix.
I need a PeopleSoft Guru to figure this one out!

Any suggestions?
This is a challenge!