SBS2008 Odd login issue - The Local Session Manager service failed

There were some recent complaints that many user are unable to login to windows server. It keeps on failing and I am not able to understand the reason behind it. I had tried to find out the error but in logs there are ample of issue mentioned. I think there is some internal bug. The same was working well, but this problem just evolved quiet suddenly. So does anyone has more idea about the problem. I hope there will be some way.

Try to work back in safe mode and then check back. It will be more helpful for you. I think there is some issue with the services. You have to go in event log and check the report. There you can find a more appropriate option about the problem. A number of time the problem also appear due to server upgrade. The profile structure which actually remains the same as it was but somehow it can create trouble with folder permission.

You could limit where you server will accept email from. If you use a spam/spyware/virus filtering service (e.g. Securence) AND you have a good firewall that will let you restrict port 25 to certain IP ranges, then you can put these restriction in place.
If you do not have this capability, then 'they' will just keep knocking on your door.

Another stop-gap solution is to use a smart host provider, such as dyndns.org's mailhop service. For many setups I have set this as the only MX record, changed the inbound SMTP port on the server and set the service to forward to that port. Additionally, taking advantage of the store & forward feature of these types of services gives your user's a bit of fault tolerance during outages.

I am getting the same messages that are written below when I try to log into my SBS 2003, everyday, and the only fix is to restart the server:

"The Local Session Manager service failed the logon.
The group or resource is not in the correct state to perform the requested operation."

"Your system is running low on resources. You cannot log on as a new user. Please use an account that has already been logged on."

Can anyone tell me how to solve this problem? I have also checked at the security and system event logs and dont see anything that is wrong?

You can try to download and use the PFE edition of the Microsoft Premier Support Reporting Tool is used mainly by Microsoft Premier Field Engineering team to help Premier Services customers gather detailed system status and configuration information. To get it, go to this link here - http://support.microsoft.com/kb/823393

Thanks for the reply, but I have found the problem, it was actually the "DPI Scaling" and I just had to change it from the default. So, after changing it back to the default 96 DPI scale, I was not getting the issues of logging in.

When opening a published application (Notepad) through Citrix I get the following message: "The local session manager failed the logon".

When I click OK, the message disappears and the application never launches. This is only happening on a Windows 2008 x64-bit server. This happens regardless of launching from a workstation or in a loopback on the server.

I also tried the same thing with streamed application through Web Interface or the Citrix Streaming Offline Plugin (PNAgent) with the same result. However, when launching the streamed application on the server using the command line Raderun, it opens just fine.

This seems to be an OS issue. Can anyone give me some guidance on why I would get the message: "The local session manager failed the logon"?