I have fiddled with this a lot, tried loopback processing on, moved the GPO around in and out of various OUs with no luck.
If I use the group policy modeling wizard it shows that the launch calc.exe at login is applied. But when I go to the workstation and run a gpresult /R it is NOT applied as below:
C:\Windows\system32>gpresult /R
Microsoft (R) Windows (R) Operating System Group Policy Result tool v2.0
Copyright (C) Microsoft Corp. 1981-2001
Created On 8/31/2011 at 9:37:10 AM
RSOP data for CORP\frizzo on WIN7 : Logging Mode
-------------------------------------------------
OS Configuration: Member Workstation
OS Version: 6.1.7601
Site Name: Default-First-Site-Name
Roaming Profile: N/A
Local Profile: C:\Users\frizzo.CORP
Connected over a slow link?: No
COMPUTER SETTINGS
------------------
CN=WIN7,OU=HR_Computers,OU=Human Resources,DC=corp,DC=local
Last time Group Policy was applied: 8/31/2011 at 9:31:38 AM
Group Policy was applied from: DC.corp.local
Group Policy slow link threshold: 500 kbps
Domain Name: CORP
Domain Type: Windows 2000
Applied Group Policy Objects
-----------------------------
Launch calc.exe at login
Default Domain Policy
IE Default Home Page
The following GPOs were not applied because they were filtered out
-------------------------------------------------------------------
Hide Screen Saver Option
Filtering: Not Applied (Empty)
Local Group Policy
Filtering: Not Applied (Empty)
Prohibit Changing Sounds
Filtering: Not Applied (Empty)
The computer is a part of the following security groups
-------------------------------------------------------
BUILTIN\Administrators
Everyone
BUILTIN\Users
NT AUTHORITY\NETWORK
NT AUTHORITY\Authenticated Users
This Organization
WIN7$
HR-Computers
Domain Computers
GET - Auto launch calc.exe
System Mandatory Level
USER SETTINGS
--------------
CN=Frank Rizzo,OU=HR_Users,OU=Human Resources,DC=corp,DC=local
Last time Group Policy was applied: 8/31/2011 at 9:33:59 AM
Group Policy was applied from: DC.corp.local
Group Policy slow link threshold: 500 kbps
Domain Name: CORP
Domain Type: Windows 2000
Applied Group Policy Objects
-----------------------------
Prohibit Changing Sounds
IE Default Home Page
Hide Screen Saver Option
The following GPOs were not applied because they were filtered out
-------------------------------------------------------------------
Launch calc.exe at login
Filtering: Not Applied (Empty)
Default Domain Policy
Filtering: Not Applied (Empty)
Local Group Policy
Filtering: Not Applied (Empty)
The user is a part of the following security groups
---------------------------------------------------
Domain Users
Everyone
BUILTIN\Administrators
BUILTIN\Users
NT AUTHORITY\INTERACTIVE
CONSOLE LOGON
NT AUTHORITY\Authenticated Users
This Organization
LOCAL
High Mandatory Level
C:\Windows\system32>


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Jeremy covers it in the book (think it's page 5!) but I'll give my brief version.