Cannot Login RDC: An authentication error has occurred (Code: 0x8007001f)

I signed up with Azure and fired up a couple of Windows Server 2012 VMs.

As I'm signed up with my Microsoft account and it automatically created a user “karl” (my first name) with my MS account password. All cool.

In the Azure web console you can create RDP connection and download and use - all fine works well.

Now I want to let some developers in so I don’t want to give them my password. So I go to Manage… Create a user “developer” – no domain here, just local account, give it a password, admin group etc.

When I try to connect as the developer account from my home I get:

An authentication error has occurred (Code: 0x8007001f)

Since I'd "deleted" the Karl login, I had to re-enter my Microsoft Account details - "karl" and now that doesn't work!

I googled everywhere - Azure want $30 a month support (minimum 6 months!), so thats a No too.

I tried all forms of username/domain combination:

karl
.\karl
\karl
MicrosoftAccount\karl
\mymsemail@outlook.com 

etc etc. none work.

I then when to the web console again and downloaded the .rdp file - that doesn't work either!

Luckily I did this on my laptop and I still have a saved connection on the destop machine that I can get in with. And I installed tightVNC as a backup to be able to get in and get the stuff off if there is another cock-up.

Then I tried logging into the other machine on the AZure virtual lan and connecting RDC from that one. And it works! So maybe is a port or some other issue. The machines are standalone - no domain involved.

Any ideas?

OK found a working solution.

http://support.microsoft.com/kb/941641

Essentially save out an .rdp file

Open it in Notepad, change to:

authentication level:i:0

and add line:

enablecredsspsupport:i:0

Now RDC works like it used to, that is.. you can actually see the remote screen and login there, rather than a modal on your own PC.