ClickOnce can't be used in Windows Terminal Server
This article explains why ClickOnce can't be used to deploy applications on Windows Terminal Servers.
Original product version: .NET Framework
Original KB number: 2020945
ClickOnce can't be used to deploy applications on any Windows Terminal Servers including 2008 and 2008 R2.
This is because of a limitation within the Windows Terminal Server remoting functionality.
This is a limitation regardless of how the ClickOnce deployment is initiated include clicking on the deployment URL from within a standard Terminal Server session or using the Start a program on the Programs tab in the Remote Desktop Connection (MSTSC).
ClickOnce apps aren't supported as RemoteApps.
While it might be possible to get a ClickOnce application to deploy on some of the older operating systems this functionality hasn't been tested and could be adversely affected by future operating system service packs.