Windows Server 2008 R2 Alternate procedure:
Start, Administrative Tools, Local Security Policy, Account Policies, Password Policy, Password must meet complexity requirements – Disabled.
You can also change the password expiry period here.
To turn password complexity off in Windows 2008 Server follow these steps:
run gpmc.msc (Group Policy Management)
Expand your Domain
Go to <Group Policy Objects> and select <Default Domain Policy>
Expand:
<Computer Configurations> <Policies> <Windows Settings> <Security Settings> <Account Policies> <Password Policy>
Disable Password Complexity.
This is the only way to disable Password Complexity in Server 2008. The local Security Policy can not be used for changing Password Complexity in Server 2008.