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Password security policy

I have a windows standalone XP pro machine that I did not load. I am attempting to reconfigure the user accounts. I want to change the password requirements which is not so straight forward as I would expect. Basically, the password complexity is disabled, but still it requires lower case + capital + number + special character and I want to do away with the strict requirments.
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MarcSpencer
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Go to run type secpol.msc -> Security Settings -> Account Policies -> Password Policies, what do you see here for the policy's security settings? No matter what group policy is being applied, it has to reflect here if it is part of domain, if not you can make the change to disable the complexity. Set everything else to '0' and 'disabled', just in case.
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found a custom dll in HKLM\SYSTEM\CurrentControlSet\Control\Lsa subkey Notification Packages that was causing the complexity requirements. Once deleted I rebooted machine and issue was corrected. thanks.