A thorough search of the Registry hive of an XP Home SP1 machine reveals a complete absence of Policy keys of the sort required for setting & enforcing a Password Policy. And, as the Group Policy snap-in (GPEDIT.MSC) does not work with XP Home, this cannot be the source of this "problem."
The only "security " tool provided with XP Home is CACLS.exe, which deals solely with file access, not passwords.
If you are actually experiencing what you seem to be describing, then such is [b]not[/b] the result of an un-modified version of XP Home.
In order to proceed, we will need additional information, including, at the least:
1) Where/when/how is a requirement for a "complex" password exhibited?
..a) Windows User Log-in? If so, which Users?
..b) Application access? If so, which?
..c) File access? If so, which?
2) What entries are in the msconfig file?
3) What entries are in the Startup Folder?
4) Has this "problem" existed since XP was 1st installed on this machine? If not, when did it begin?
5) Was XP "factory" installed?
Include any & all history of the life of this machine that deals with its ownership, changes to ro re-installs of the OS, etc..