Cannot print to an HP Laserjet 1020 using Terminal Services

Terminal Services can only print to your LPT printers (with proper driver installed on the server). In order to print to network printer or USB printer,

1. Install the printer normally (connecting via TCP port or USB port) and make it a shared printer (ie. \\COMPUTERNAME\PRINTER)
2. Install ANOTHER instance of the printer, using the LPT1: (or LPT2:) port
3. Launch an administrative command prompt, and map the LPT port to the shared printer instance:

net use lpt1: \\COMPUTERNAME\PRINTER /persistent:yes

Now, you have an LPT: printer. If you set it as your default printer you can print locally, and Terminal services should now allow you to print from your TS session, as well.