I have had the same problem with WTS. Here are a couple of things to try.
First of all, make sure the driver for your local printer is loaded on the WTS box. If it is, and it is a valid W2K driver, WTS should recognize your printer.
I have also found that W2K does not support many printer drivers that were supported by WIN98 and even NT4.0. In these cases, the NTPRINT.inf file needs to be modified. Find the section [Previous Names] and you should see the following:
; Previous Names
;
; This sections gives previous names for a model. This is currently used only
; for Windows 9x --> Windows NT point and print
;
[Previous Names]
"HP DeskJet 895Cxi" = "HP DeskJet 895C Series Printer"
The left side is a valid name for a driver installed on the WTS box. The name on the right, is the name of the old driver. What this does is tell the WTS box to load the driver on the left when ecountering the driver name on the right. Make sure the name on the left matches exactly with an entry under the OEM's section, in this case [HP]. After doing this, the client machine may encounter a message indicating the signature file has been modified. Just ingnore this and things should work fine.
In the example above, a client PC has an HP DeskJet 895C printer installed. The WTS box has to have the HP DeskJet 895Cxi driver installed.
I have used this method for several printer manufacturers and models, and have had no problems with printing to client's local printers.