"The local policy of this system does not permit you to logon interactively"

This happened after someone made some changes to their group membership and locked themselves out of everything. You can't be a member of EVERYTHING in the list.

Rule of thumb here is DENY always overrules ALLOW.

He couldn't log in locally anymore, or remotely for that matter.
"The local policy of this system does not permit you to logon interactively"
Turns out this person had been playing and added him to a group that was denied permission to log in locally.

This just may be the case in your event. If so then check the group membership for such a person. Or maybe Group Policies.

Here is a link that may help:
http://support.microsoft.com/kb/841188

Or maybe you can try this one.
Start
Run
secpol.msc

Navigate to “Local Policies”, then select “User Rights Assignment”.
Find “Allow logon through Terminal Services”. Check and make sure that “Administrators” and “Remote Desktop Users” are in the list. If they aren’t, click “Add User or Group”, and add the user.
Apply and Test

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