I've got a client running Terminal Server 2008 R2, connecting from Windows XP terminal services client (not sure of the local RDP version, I think they've got all their service packs though) and whenever they copy text from the terminal server and paste it back on their machine, all they get is 5 Squares (regardless of what they copy or where they copy it from).
I'm debugging this for an application I am responsible for, but I get the same problem from Notepad as I do for my program, so I think it's a server problem (still my problem, eh?).
The option to use clipboard resources is checked.