SystemRoot\System32\RDPDD.dll failed to load

copied from:
http://blogs.technet.com/brad_rutkowski/archive/2008/01/04/systemroot-system32-rdpdd-dll-failed-to-load.aspx

RDP simply flashes when you try to RDP

\SystemRoot\System32\RDPDD.dll failed to load

This is an FYI post for an issue we've seen on a couple of Windows 2003 SP2 servers internally. Hopefully if someone hits this in the wild they'll be able to find this post on the intertubes.
Symptom:
When attempting to connect from the client via RDP, you would click “connect” and then soon after it would silently fail and “connect” would be clickable again.

Each time when attempting to connect, the server would log this event:
Event Type: Information
Event Source: Application Popup
Event Category: None
Event ID: 26
Date: 9/25/2007
Time: 12:13:57 PM
User: N/A
Computer: ServerX
Description:
Application popup: : \SystemRoot\System32\RDPDD.dll failed to load

For more information, see Help and Support Center at http://go.microsoft.com/fwlink/events.asp.
Data:
0000: 00000000 006c0002 00000000 4000001a
0010: c0000017 c000009a 00000000 00000000
0020: 00000000 00000000

Our Resolution
A) We found that in our cases it was an issue with the ATI driver and by either rolling back the ATI driver for the display on the server or upgrading the display driver on the server resolved the issue. Reports in the comments show the same for Nvidia drivers

B) In another instance it was found that by going to: Display Properties --> Settings --> Advanced --> Troubleshoot, turn off "Hardware acceleration” resolved the issue as well without adjusting the drivers.

C) On the internet I've seen posts showing SFC to help but in my cases it did not.

Update from comments:

D) A solution found at http://forums.nvidia.com/index.php?showtopic=67147&hl=remote%20desktop&st=60 worked for me (and others.)
It's a registry fix that increases the size of the session image space. Add the following key:
[HKEY_LOCAL_MACHINE\SYSTEM\CurrentControlSet\Control\Session Manager\Memory Management]
"SessionImageSize"=dword:00000020
Where 00000020 is hex for 32
In any case the event was a red herring and was just a generic error being bubbled up from Win32k.sys.

NOTE: We were able to change the entry remotely using regedit to connect over the network - then reboot the server.