In Windows 2003 Server, one can not enable offline files when remote desktop is enabled on the machine. When we open Offline Files tab in Folder Options window we see a message that ‘Remote desktop is configured to support multiple connections. Offline files cannot be enabled with remote desktop in this configuration.‘ Snapshot of this is shown below.
The only way you can enable offline files to disable remote desktop first. There is no other way to resolve this issue. Note that this problem is only for Server 2003 editions and this issue does not arise in Windows XP or Vista or Windows 7.
After disabling remote desktop reopen Folder options window from explorer. Now you will be able to see offline files settings in Offline files tab.