I have a server running server std 2008 r2 fully patched. There are 8 Wyse C10LE's that connect to the server via RDS. Everything is working fantastically with the exception that there is no audio... There is not a sound card in the server, but I have the setting to bring the audio to the wyse terminals. I have made sure that the group policy has been configured so that the audio should be working on the clients end. Do I need a sound card, if not has anyone else ran into similar issues?
Is the Audio Service running on the server? Check the tray icon and Task Manager Services tab.
Verify that the windows audio service is running. Windows cannot redirect the audio without it. 2008 does not require an audio card (2003 DOES)
The Red X means that no audio device is installed, which as Jim B pointed out is not required. When connecting to the server, if all the settings are in place you should see the Volume icon active (no RED X) and hovering over it you should see "Remote Playback Microsoft RDP Audio Transport".
Double check the Audio redirection settings on the RDP protocol on the server, on the user object in AD, and on the client.