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I have terminal services running on a Windows 2000 Advanced Server. When I try to connect to it with Remote Desktop running on a Win98 machine, it takes a very long time to get to a login screen. After that, it works fine. They are connected over a wired local area network (LAN). A packet sniffer on Win98 shows no packets sent until it connects.
One possibility is that it's loading a roaming profile for that user -- perhaps a large roaming profile with lots of files attached to it. Loading large profiles can definitely slow down logon time.