You will indeed need a Windows 2003 license server with licenses on it for this to work. Since you're migrating...
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from Win2K TS to Win2K3 TS, I'll give some additional background.
For this to work, you'll need both a license server with the appropriate number of per-user or per-device licenses and to set up your terminal server in the licensing mode matching the licenses you have installed. Although the terminal server will operate without a license server for the duration of the grace period, when the grace period ends at 120 days then the terminal server will stop accepting connections without permanent TSCALs. (The grace period ends at 120 days or when the TS first finds a valid license server, whichever comes first.)
If you put the license server on the terminal server, I recommend that you edit the Registry (or install SP1 to add this functionality to TS Config) to point directly to the license server, rather than relying on discovery.
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