Cannot connect to win 2003 after installing Terminal Server

Hi, I have a Windows 2000 server acting as a domain controller and I have a windows 2003 R2 server running as an application server.

I used to be able to connect to the Windows 2003 server from XP using Remote Desktop Connection as an Administrator or as a local user who belonged to the Remote Desktop group. But I needed more than two users to run simultaneously, so I installed Terminal Server and Terminal licensing on the Windows 2003 server. After rebooting, I noticed that I couldn't log via remote desktop connection anymore. I also purchased Windows CALs and Terminal Server CALs and activated those but it made no difference. I tried adding the users manually into the Remote desktop user group and made sure all of them access to Terminal server but no luck.

The message I get when I try to connect is:
To log on to this remote computer, you must have Terminal Server User Access permissions on this computer. By default, members of the Remote Desktop Users group have these permissions. If you are not a member of the Remote Desktop Users group or another group that has these permissions, or if the Remote Desktop Users group does not have these permissions, you must be granted these permissions manually.

Someone please help!!!