Haven’t posted in a while… This issue really bothered me. Such a simple fix that took so long to find.
I found this solution on Alex’s IT Blog here.
We had a Windows Server 2008 R2 Terminal Server recently have an issue where it had a BSOD everytime a user logged in. No one had recently installed any applications, updates, or made any major changes to the OS. We had plenty of backups that we restored that exhibited the same issue. The server booted properly and you could even manage it remotely without issue. Booting into Safe Mode and logging in worked fine as well. A memory dump said services.exe was to blame and something in the registry was corrupt.
Boot your failed server into Safe Mode
Change LastKnownGood to 3
Change Failed to 2