The following knowledgebase article explains the situation in which new users can not log on to local computer or domain.
The following may be the scenario:
1. Newly created users can not log on to the system
2. All Users and Default User profile is corrupted.
3. All Users and Default User profile is pointing to a different location in the registry.
By default, when Windows 2000 is installed it creates the two default folders. These two folders are: All Users and Default User. The logon process of user creates the user profile of the newly created user in the \Documents and Settings folder. The logon process uses these two folders to copy the contents to new profile. Windows identifies these two folders by looking at the following registry location:
In the right pane, Windows will have the following entries:
ProfilesDirectory REG_EXPAND_SZ %SystemDrive%\Documents and Settings
DefaultUserProfile REG_SZ Default User
AllUsersProfile REG_SZ All Users
You may need to take the following action to correct the abovementioned issues with the user profile:
1. Copy the All Users and Default User from a working computer to problematic computer.
2. Change the location of All Users and Default User profile in registry so that it points to the correct location.