Can't change XP logon style when PC is registered in a domain?

Not a glitch.  Its just not possible, unfortunately.

here's a question, if the pc is joined to a domain instead of a standard workgroup (which is what you would you use if you were a home user or SMB user), I would assume that this pc in question is used at work where it's connected to the corporate network which is why your pc logs on to a domain. Why are you trying to change the logon style? Are you even allowed to perform this change on your pc which would sound like a work desktop as opposed to a machine you would use at home. Technically to view the welcome screen which is what you're referring to where you can actually skin the logon screen, the multiple users setup on a pc show up in larger text on the logon screen and you click on a user account and enter a password to login to a pc, and fast user switching is enabled, etc. the pc must not be joined to a domain.

If you are setup as the local admin on that machine (note, where I work, most of the regular users are setup with the restricted user account type, we never set them up as the local admin; too much power in the hands of people who usually don't know enough about what they're doing when they're farting around on a machine plus it's make spyware & virus infection much easier when the machine is operated by an admin account - software can be installed, etc.), disconnect yourself from the current domain and just connect to the workgroup "workgroup" or whatever name you want to give to the workgroup setting (you have to use something).

However disconnecting yourself from the domain will also affect your connectivity to your company's network resources, ex. access to mapped network drives & network printers, email, possibly even internet access.

If this is a company desktop, I advise you to leave it connected to the domain as it currently is - you shouldn't change this setting if this is how the pc was setup for you and it is a work pc; better yet speak to the systems admin who sets up the machines for you and ask him if it's ok to do what you're attempting (more than likely he will say NO - or at least that's what he should say). I would also ask why you're setup as the local admin on a machine that is joined to a domain?

I have local computer admin rights. I also have full admin rights to my computer logging onto the corporate domain and no there are no restrictions from skinning your logon. Skinning the logon simply does not work unless you delete the domain logon account.

It's been this way from the beginning. Not sure of all the technical reasons, but once a machine joins a domain, your stuck with the domain logon, even for logging on to a workgroup (unless you delete it, as you mentioned). And for other technical reasons I can't explain, you can't skin it or use a User Pic.