Problem
When you try to connect to a Windows Server 2003 box using Remote Desktop Connection (mstsc), you get an error message that you can not connect; because the number of connection exceeded the limits.
The number of available connection sessions through Remote Desktop Connection are limited to two (active or disconnected), and inorder to connect an empty session must be available to you. One of the mistakes is to exist the Remote Desktop Connection tool by clicking the X at the top right corner; this will disconnect the session, however it will not terminate it. So be sure to exit the RDC by using the log off command.
Solution
Run the Remote Desktop Connection tool with the /console switch. This will allow you to connect to Session 0 (Console). Please note that the documentation incorrectly state that you can use the /console switch with Windows Server 2000 boxes, this is incorrect and it's only valid with Windows 2003 Server boxes (KB#311926).
Example: mstsc /console
Typically after you login using the /console switch, you would terminate the idle sessions, you can do this using the Terminal Services Manager.