1) You only need the Set statement when you are assigning a value (e.g. Nothing) to an object, or assigning an object to a variable. The .CursorLocation property expects a numeric value (adUseClient is a defined constant with the value 3 for instance), not an object, and so the Set statement is not required. Ditto for .CursorType - consult your documentation to see what properties of the various ADO objects *are* actually objects, and which are simply string or numeric values.
2) Although not actually the cause of your current problem, once you have removed the unnecessary Set statements you may find that it will give you an error (something like "adUseClient is not defined") or perhaps simply not work as expected (but fail to raise an error). In both cases, and as DaveMaxwell has already pointed out, you must ensure that the ADO constants have been loaded by the ASP script engine - either by including the ADOVBS.INC file (the old way) or by including the appropriate METADATA statement in your script (which is much better)... see here for more...
3) "dymanic" is not only spelt incorrectly, but is not a valid CursorTypeEnum constant anyway - perhaps you mean "adOpenDynamic"? 
4) Finally, your second "Set RS..." statement completely destroys the Recordset object that you have manually created and replaces it with completely new Recordset object, and hence your CursorLocation and CursorType settings (as well as anything else about the Recordset that you have altered) will be lost.
There are a great many ways to perform a query and return a recordset, but since you already seem to have an open Connection object and you clearly want to use specific Recordset settings, the most efficient method is probably to do the following (which also includes the changes I have suggested earlier):
Code:
<!-- METADATA TYPE="TypeLib" NAME="Microsoft ADO Type Library" UUID="{00000205-0000-0010-8000-00AA006D2EA4}" -->
<%
Dim RS
Set RS = Server.CreateObject("ADODB.RecordSet" )
RS.CursorLocation = adUseClient
RS.CursorType = adOpenDynamic
Set RS.ActiveConnection = cn
RS.Source = "SELECT * FROM thistable"
RS.Open
%>
This could also be written like this:
Code:
Dim RS
Set RS = Server.CreateObject("ADODB.RecordSet" )
RS.CursorLocation = adUseClient
RS.Open "SELECT * FROM thistable", cn, adOpenDynamic
(note that there is no optional parameter for the CursorLocation property in the Open() method)
Does any of that help?

PS - I strongly suggest you download & refer to the ADO documentation which comes as part of the MDAC SDK, is located online here and is available for download here.
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