Terminal server 2003 when there are lot of users logging on/off and you have group policy preferences enabled can cause large amount of folders\files to be written to the group policy\ history folder in the all users directory. All this added up to some rather slow disks
Winlogon.exe was polling all these files every 40 seconds or so, this cause the idle disk time to drop to 0% and queue length to shoot up. Once of the test were dir /s every few moment it would pause.
Detected with procmon, set on files only and all other filters removed. Then used the file summary to locate what is causing the large amount of queuing.
Solution: weekly deletes of ...users\all users\application data\microsoft\group policy\history\* sub folders
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