Edit:
Gah...I'm sorry, I didn't check your question correctly...Terminal Services are Remote Desktop Services now since Windows Server 2008 R2 (I think). Sorry!
Check your RDS settings on the server itself - not GPO -, under
Remote Desktop Session Host Configuration
(override user settings) and try specifying the time limits there.
Check the following GPO settings:
Computer Configuration\Policies\Administrative Templates\Windows
Components\Terminal Services\Terminal Server\Session Time Limits
Your GPO settings are only for RDP sessions, not for Terminal Server sessions.