Users cannot logon to the Terminal Server

When users try to logon to the terminal server they get the following error

Insufficient system resources exist to complete the requested service

or their sessions just drops during the login process without any errors.

In this case one of the reason could be that your terminal server is handling the memory usage correctly.
check the event log to see if you can find event 1500 and event 1508 for each unsuccessful logon attempt.

if yes then use the following method:

To resolve this problem, modify the registry to increase the PoolUsageMaximum value and the PagedPoolSize value. To do this, follow these steps:

1. Click Start, click Run, type regedit, and then click OK.
2. Locate and then click the following registry subkey:

   HKEY_LOCAL_MACHINE\SYSTEM\CurrentControlSet\Control\Session Manager\Memory Management

3. On the Edit menu, point to New, and then click DWORD Value.
4. In the New Value #1 box, type PoolUsageMaximum, and then press ENTER.
5. Right-click PoolUsageMaximum, and then click Modify.
6. In the Value data box, type 60, click Decimal, and then click OK.
7. If the PagedPoolSize registry entry exists, go to step 8. If the PagedPoolSize registry entry does not exist, create it. To do this, follow these steps:
   1. On the Edit menu, point to New, and then click DWORD Value.
   2. In the New Value #1 box, type PagedPoolSize, and then press ENTER.
8. Right-click PagedPoolSize, and then click Modify.
9. In the Value data box, type ffffffff, and then click OK.
10. Exit Registry Editor, and then restart the computer.

source: http://support.microsoft.com/default.aspx/kb/935649