Over time I have spent considerable resources investigating terminal server connection issues. Most of the time they manifest themselves as either no connection to the Terminal Server, Black logon screen and then disconnection from the Terminal Server or similar related events. A Terminal Server (Windows 2000) may log error messages in the event log indicating failure to obtain a license for the client also.
The key reason for these issues tends to be the IP Packet Size or MTU on the Win9x client PC. Windows 2000 and Windows XP seem to be better able to negotiate this function and therefore a not as much of a problem. To resolve this problem on Win9x clients, obtain and install the DUN 1.4 upgrade patch for that operating system. These are available onwww.sbsfaq.com in the Files section. Once installed, go into the Network Settings, and on BOTH the Dialup Adapter and Dialup Adapter#2 (VPN Support) change the IP Packet Size from Automatic to Small. To get to this go to the properties of the Dialup Adapter and Dialup Adapter#2 (VPN Support), then the Advanced Tab – you will find that IP Packet Size is an option here that you can set to Small. Both must be done to ensure successful connections.
Reboot the PC and you should find that your connection issue has been resolved.