Your computer can't connect to the remote computer because an error occurred on the remote computer that you want to connect to

I experienced an issue at a customer site with with a new Remote Desktop Services deployment on Windows Server 2008 R2 when building a Server Farm.

 

When Windows 7 PC's accessed a RemoteApp or attempted create a remote desktop session using the Microsoft Terminal Services Client (MSTSC.exe) they were able to connect to the farm without problems.

 

When an Windows XP PC accessed the remote desktop farm, the following error was experienced:

 

"Your computer can't connect to the remote computer because an error occurred on the remote computer that you want to connect to.  Contact your network administrator for assistance."

 

After researching the issue it turned out that the RD Session Hosts needed to be configured to use RDP Security as the Security Layer.  After installing a custom trusted certificate to the RDP-Tcp connection to ensure users connecting to the session hosts do not receive RDP Certificate not trusted warnings the issue started occuring.

These configuration options can be found under "Remote Desktop Session Host Configuration"

 

By default the Security layer was set to Negotiate.

 

Set all servers to RDP Security Layer in your farm to ensure both XP and Windows 7 clients can connect.