GPO shows in GPRESULT and RSOP but does not apply

I have GPO that prevents disconnection of idle TS sessions and termination of disconnected sessions. The GPO works perfectly until today when it failed to apply on W2K8 box. GPRESULT and RSOP both show that the GPO is applied on user settings but when I open the Remote Desktop Session Host COnfiguration, the settings are grayed out and are those of a different policy. The registry even shows the correct settings but users still get disconnected!

Thanks.