Unable to Log You on Because of an Account Restriction

This behavior can occur if the account you are using to connect with has a null (blank) password. You cannot establish Remote Desktop connections when you are using an account with a null password.

You can disable blank password restrictions by using a policy. To locate and change this policy:

1. Click Start, point to Run, type gpedit.msc, and then click OK to start the Group Policy Editor.
2. Open Computer Configuration\Windows Settings\Security Settings\Local Policies\Security Options\Accounts: Limit local account use of blank passwords to console logon only.
3. Double-click Limit local account use of blank passwords to consol logon only.
4. Click Disabled, and then click OK.
5. Quit Group Policy Editor.

http://support.microsoft.com/default.aspx?scid=kb;en-us;303846