Ok i think i fixed it.
It seems it was a SP 2 issue. I needed to do the following:
To allow anonymous remote access in DCOM:
1.From the Start menu, click Run and type Dcomcnfg.exe.
2.In Component Services, click Console root, click Component Services, click Computers, and then click My Computer. On the Action menu, click Properties.
3.In the My Computer Properties dialog box, on the COM Security tab, in the Access Permissions section, click Edit Limits.
4.In the Access Permissions dialog box, grant Anonymous Logon allow Remote Access.
5.Restart the computer.
I have tested remote desktop connection, which worked, to a win2k box and a XP box. The connection is a little slow at first but then it is much faster than using remote desktop to hte SMS server then remote desktop to the users PC.
thanks,
Dave