I'm not sure if I'm reading what you're describing correctly; if you virtualize the system, you'd be running an older version of Windows within the terminal server and having them connect to that older version in order to run the app from within.
I'm not even sure it's recommended that you run virtualization within a terminal server for multiple users. Things like Hyper-V are meant to create a dedicated virtualization server (i.e., a hyper-V server running a mail server, DNS server, etc., not a terminal server virtualizing sub-sessions. That's what the Win32 sub-system is basically for).
If you're going to get the server, hyper-v it, then run a terminal server within it as a guest with an older version of Windows, I'm not sure what you're standing to gain in doing that unless you're migrating other servers or consolidating on the same hyper-v server. You'd be taking a performance hit that needs to be offset by the advantages of adding other servers to the same hyper-V server.
What you might be able to do is install virtualbox and see if you can run a version of DOS (like FreeDOS) within their session, if the application will run in it. Or an older version of DOS. You would have to test it to see if that is compatible with multiple sessions, though, as you may need to tweak access to hardware settings to make sure Windows doesn't crash or the Virtualbox session doesn't crash.
I might just be confused though. It's early in the morning right now...but depending on what you're going to be adding to the hyper-v server additionally, I'd first test Virtualbox for individual sessions.