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 should DISABLE the policy option with the following steps on the Windows 2008, 2003 system:
- Start menu / Run...
- type gpedit.msc and press ENTER
- go to the Local Computer Policy / Computer Configuration / Administrative Templates / Printers
- right click on the Disallow installation of printers using kernel-mode drivers and choose the Properties submenu item
- set the DISABLE property to it and press OK
The next time the Terminal Server users log in the error will not appear.
Please note - Windows Update may reset this policy during security updates requiring the Terminal Server Administrator to manually change this setting back.