When you use Remote Desktop Connection to connect a client computer to a Windows Server 2003 terminal server, and one or more printers are locally connected to the client, you can see the redirected printers, but the clients default printer is not set as the default printer in the terminal server session and you cannot set it.
This behavior will occur if the HKEY_CURRENT_USER\Software\Microsoft\Windows NT\CurrentVersion\Windows sub-key is missing, generally because the default user profile on the terminal server is corrupt.
To resolve this issue:
1. Log the user off the terminal server.
2. Copy the %SYSTEMDRIVE%\Documents and Settings\Default User folder from a working Windows Server 2003 computer running the same Service Pack to %SYSTEMDRIVE%\Documents and Settings\Default User on the terminal server, overwriting all files.
3. Delete the problem user profile on the terminal server.
The user can now log on to the terminal server.