Event log message TermDD: The RDP protocol component “DATA ENCRYPTION” detected an error in the protocol stream and has disconnected the client on windows 2008 server connecting from XP/older thin client

After installing Windows 2008 servers as my terminal server I found that my old VXL Itona thin client would not connect giving the message “Connection reset by peer” . You will likely experience the same problem if you’re running an older RDP 5.1 client on Windows XP or Windows 2003.

The reason is that when installing Windows 2008 terminal services the default setting is for terminal services access is “Allow connections only from computers running Remote Desktop with Network Level Authentication (more secure)”-