As you have probably found by now, the default policy for Windows 2003 is to apply strong passwords, which will maximise security, but unfortunately will also annoy your users. 

By default Windows Server 2003 requires passwords to meet the following criteria for strong passwords.

• Has at least 6 characters
• Does not contain "Administrator" or "Admin"
• Contains characters from three of the following categories:
  • Uppercase letters (A, B, C, and so on)
  • Lowercase letters (a, b, c, and so on)
  • Numbers (0, 1, 2, and so on)
  • Non-alphanumeric characters (#, &, ~, and so on)

Caution: Loosening password restrictions decreases security.
 

To change these settings, you need to go to "Domain Security Policy" from "Administrative Tools".

Click on Security Settings > Account Policies > Password Policy.

Right-click on any item in the right pane and select Properties to change it settings.

Once all changes are complete, make sure you run "gpupdate /force" from the command prompt to apply the policy.