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For what it's worth, I can confirm that folder redirection (both My Documents and Desktop) is working under SP3 in my domain - this is on my test box, I haven't deployed SP3 to production yet. You say you've tried a clean install, so I assume you've tested it with no third party software present, in particular anti-virus and other security software? (I've seen a number of problems with SP3 tracked to security software.) Have you tried using a fully qualified server name in the path, i.e., \\student.yourdomain.whatever\students\etc? I've found in the past that using unqualified server names tends to be less robust.