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Click start and type gpedit.msc to open the Policy Editor
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Open Computer Configuration (left hand pane)
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Open Windows Settings (left hand pane)
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Open Security Settings (left hand pane)
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Open Account Policies (left hand pane)
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Open Password Policy (left hand pane)
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Doubleclick on the Password must meet complexity requirements
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Select Disabled
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Press OK
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Close the Policy Editor
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Run gpupdate.exe
If the setting is enabled and greyed out, it means your
Windows Server 2008 box is member of a domain and you need to address
this issue in Group Policies or in the Local policy of your Domain
Controllers. This is explained on the explanation tab of the policy.