Just to draw your attention to a comment from dooke on my blog....

I had the same problem a few weeks ago.

The problem here is that you probably use an msdn key for Office 2007. Microsoft has a built-in validator of what license you are using and you can only use a volume license or cd-key license when you are using office in a terminal server.

So, you need to use a volume license or cd-key of the enterprise edition before you can use it in a terminal server environment.

thanks to dooke for his explanation of this issue.  I am indeed currently using an MSDN key, so at some point soon I will try a volume license key and see the wonderful transformation :-)