OK, let's make sure I've got it right:

* You have a 2003 DC + TS Licensing Server
* You also have a W2K Terminal Server, which has detected the 2003
LS (it's the TS that must detect the LS, not the other way around)
* You have W2K Pro and XP Pro clients, who try to connect to the
W2K TS, but get a licensing protocol error.

This should work, since the 2003 LS also has the built-in
"Existing Windows 2000 Per Device TS CALs", which should be issued
to the W2K Pro and XP Pro clients. As long as your clients only
connect to a W2K TS, you certainly do not need to buy 2003 TS
CALs.
The only problem here that I can think of is that the clients have
problems with renewing their TS CAL, since it should now be issued
by a new LS. You can test this by deleting the locally stored
license from one of your clients, and then try to connect *twice*.
Monitor the connections in the Licensing Maneger. On the first
connection, the client should receive a temporary license, on the
second connection, it should receive a "Existing Windows 2000...."
If that happens, the problem is solved.
If it doesn't, check the EventLog on the W2K TS for more
information about the reason.

187614 - Removing Terminal Server Licenses from an RDP Client
http://support.microsoft.com/?kbid=187614

--
Vera Noest
MCSE,CCEA, Microsoft MVP - Terminal Server
http://hem.fyristorg.com/vera/IT
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<SGodschalk@discussions.microsoft.com> wrote on 28 jun 2005: