I have just installed a ZCM 11.2.2 agent on a windows 2003 Terminal server.
I have a DLU policy associated with it and also associated with users.
The policy is set to non volatile

When each user logs into the Terminal server for the very first time the DLU
appears to work. This is a good thing.

However, subsequent logons however, each user logs on to the networkl but
then the windows logon dialogue box appears. If the user enters their user
ID and password they can then subsequently logon.

I haven't seen this before. it is like the login is not automatically
switching the users for the windows piece.