This is really annoying and it took me a little while to find the fix, so I am blogging about this in hopes that others waste less time!
I have a 2008 R2 RD Session Host server farm. IT is set to accept only connections from NLA clients. Connecting from any Win7 machine works great.
Then I tried to connect via a client running XP SP3, running RDC 6.1 (supports NLA) with CredSSP enabled. I got the following error: An authentication error has occurred. The specified target is unknown or unreachable.
If I turn off requiring NLA on the farm servers, I can connect.
Next, I added RDC 7.0 and tried again. I get the same error.
I tried from more XP clients, with the same setup and I get some that get in and some that give the error. VERY CONFUSING.
Turns out, there is a hotfix out there that fixes this:
I added: http://support.microsoft.com/kb/953760, and rebooted.
Now it works.
What I find interesting is that the hotfix does not specifically lay out this exact error result.ARGH.If it had I would have found it SO much faster.
Note: WebSSO will still not work unless you have RDC 7.0 on your XP client – RDC 7.0 is a requirement for WebSSO.