“You are connected to the remote computer. However, an error occurred while an initial user program was starting, so you are being logged off. Contact the system administrator for assistance.”
In case of using of console session login process goes properly but hangs at the very end showing blue/gray layout.
Most likely the reason of the problem is missed or corrupted C:\Windows\explorer.exe file inside of the issued VE.
You will need to copy explorer.exe from C:\Windows folder on the node to C:\Windows folder of the VE. Then try to login using non-console session. When it is done it is necessary to open Task Manager and log off console terminal session (with ID=0) to be able to login with it.