The reported event appears on Windows 2008, 2003 when the Disallow installation of printers using kernel-mode drivers option is ENABLED or NOT CONFIGURED.
To resolve the issue, the user must disable the policy option performing the following steps on the Windows 2008, 2003 system:
1. Start > Run...
2. Type gpedit.msc and press Enter.
3. Go to the Local Computer Policy > Computer Configuration > Administrative Templates > Printers.
4. Right click on the Disallow installation of printers using kernel-mode drivers and choose the Properties submenu item.
5. Set the DISABLE property and press OK.
The next time the Terminal Server users log in, the error will not appear.
–NOTE: Windows Update may reset this policy during security updates requiring the Terminal Server Administrator to manually change this setting back.