I think I have answered my own question as these two references explain the problem. Use of the /3gb switch in Terminal Server in a 32 bit environment can cut the max. number of sessions in half and cuts the default paged pool limit in half. I added this when we added more memory to these boxes but this should not be done unless you have a memory hungry app., like Exchange, that can make use of that space.
http://technet.microsoft.com/en-us/library/aa998392(EXCHG.80).aspx And http://www.brianmadden.com/content/article/The-4GB-Windows-Memory-Limit-What-does-it-really-mean- ~ Finally, powerful endpoint security that ISN'T a resource hog! ~ ~ <http://www.sunbeltsoftware.com/Business/VIPRE-Enterprise/> ~
