We have a Virtualized Terminal Server running Windows Server 2008. When the admin user logs in, everything is fine. When anyone else logs in, their desktop and start menu is blank (they have the taskbar, start button, and quick launch links though). If I go into Windows Explorer, I can see icons in their desktop folder (although the icon image is missing and it is just displaying the generic icon), but can't run any of them.

If I login with a user that is part of the Administrator group in Active directory, I get the same behavior except I can launch the programs found in the Desktop Folder of Windows Explorer. I cannot drag these items out onto the desktop though - The cursor doesn't allow me to drop them. From Task Manager I can see that explorer.exe and dwm.exe are both running.

The Authenticated Users and Interactive groups are both under the Users group, along with our network's Domain Users group.

Does anyone know why this is happening and how I can fix it?

Also, not sure if it's related but about 1 in every 3 logins just hangs at a completely blank blue screen (no start button, taskbar, or quick launch buttons) and needs to be disconnected / reset by an admin.

Edit

I just noticed that the desktop itself doesn't even respond to click events. It's almost like the entire desktop is missing. At first I thought it didn't respond to right-click events because of an AD policy, but then I noticed if you open the Start Menu and click the desktop, the start menu doesn't shut like it should