Hi robertson,
What you describe here is logging in with AD user using username and password. I have no problem with this. What I'm trying to do is to login with SSO and without typing the password, as I do with PUTTY.
The reason for the gray screen you get, is that your system is trying to launch LightDM, the default display manager of Ubuntu which is not compatible with Xrdp. You should start some other display manager either in the .Xclients in the user's home or in /etc/xrdp/startwm.sh .
Rafi