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New Users Cannot Log In to PWA

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When new users are added to the system using the tool, they are added as local users on the server machine and also added to the Resource Pool, but they cannot log in to PWA (via 'Sign in as Different User' menu in upper right corner). 'Error: Access Denied' SharePoint message is displayed. This issue was seen in a virtual machine (Virtual PC 2007: Win2003 + SQL2005 + MOSS2007 + PS2007) with SP1 installed.

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