I fixed ours by configuring the Location Based Printing through the GPO just like what jonathanjabez stated.
It takes a while to configure since there isn't a lot of examples/guides out there that I can find on how to configure it. But with trial and error, I finally able to get it to work.
Just watch out if you have 50+ users and 10+ printers to choose from where each user will have different default printer.
The LBP list could go very long or you will have to utilize the Windows Print Server (on my case) and users will complaint about the delay when trying to print.
I don't think it's the LBP issue but it's the communication between the Windows 7 (on my case) and Windows Print Server somehow. (You can google Windows 7 slow printing)
A tweak needs to be done or driver needs to be updated. Something like that. I believe it's fine with Windows XP.
Microsoft needs to get it together. 