The Terminal Services service on Windows Server 2003 and Windows 2000 servers becomes confused when two users log on and one user has a more recent driver for the same network printer than the other user. When the user with the older print driver attempts to print a document, the server responds with an error message instructing the user to install a new printer.
If the user then follows the message’s instructions for installing a printer, the Print and Apply buttons for the default printer aren’t available. This problem occurs because when the user with the newer print driver logs on, the terminal server generates a new spool file for the first user (the user with the older print driver), formatted according to the second user’s more current print-driver instructions. When the server attempts to print the spool file, the format isn’t compatible with the older driver, which causes the server to respond with the error message “No printers installed” (or a similar error message).
Microsoft Product Support Services (PSS) has a patch for both Windows 2003 and Win2K platforms. The patch updates 21 files, most of which have a file release date of November 20, 2003. This problem is documented in the Microsoft article “You receive an error message when you try to print to a shared network printer in a terminal server session”.