Thanks for the reply,
I did it, it turned out that rdesktop initiates to quickly for the X.
I added the line "sleep 2" in order for the X get stable on boot and rdesktop script runs after it.
It works both by using term -e or giving the script location directly.
It was working when I was logging out to shell and getting back via startx.
However when booted for the first time, the term windows was coming and getting disappeared with rdesktop running...
Adding the line "sleep 2" into the .xsession solved the problem. I did try sleep 1 , it did not work
Maybe because I am running it in Virtual PC, however Tiny Core rocks !!!
Cheers,
Burak