Firepass static application tunnel for RDP not working XP sp3 & IE8

the setup is the user is on their local domain, They log into the firepass of the other organisation. They run a static application tunnel on RDP port. The user starts up the local RDP client, puts in the server 127.x.x.x address for the connection, Once the login popup on the machine being connected to opens with username, password and login to (domain) the option for the remote machines domain is not there? The other minor issue is that the local server will not reply by name, FQDN but only it's 127.x.x.x address on the tunnel. Only the local domain info is present. This doesn't occur is I login from a PC that is not logged into any domain, ie home PC. Regards Chris