I use a Linux Live CD to do this. Within VMware, you can use the iso.
Here is a good link from IBM:
http://www.ibm.com/developerworks/linux/library/l-livecdsec/
I used to use (still have in CD case somewhere) a product from Winternals called ERD. It was great at resetting local passwords. Microsoft recently took them over so I have no idea what it is called now. Knoppix Live CD may have the same functions to reset local account but it's been awhile I used that product as well.
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Bart's PE has ERD on it.