Hi Fellas:

 I like to set my VMC password to a numeric so I can login to my VMC using my remote.

I cannot find a way do dumb-down the password rules for my WHS user account so it can take a simpler password.

I looked in the Local Security policy on the WHS but I cannot find it.

Thanks!

First off, let me say this:
Do not play around with Local Security Policy on your WHS.  You'll probaby break your WHS, which will most likely require a Server Reinstallation to fix.

 Now, as to your issue:  if your MC box is set up right, this really shouldn't be an issue.  If the account that you're logging on with has a matching account (same username, same password) on the WHS (and, said account has access to the share(s) you want it to have), it should JustWork.

On a WHS, password policy is controlled in the Console (Settings > Passwords.)  The default setting (Medium) is 5+ characters, 'complexity' ("Strong" passwords) not required for local logon (Remote Access, though, always requires a 'strong' password.)
This might be your problem - if you're accessing your WHS with an account that's enabled for Remote Access (but, the MC box isn't using that same account name/password for local logon), then you'll need to enter that 'strong' password for access.
Make sense? 

HTH (and, please, feel free to ask questions if needed),

I don't play around with Security Policies but I do mess with GPO's on a daily basis.

Yesh, this makes sense, I'll disable the Remote Access and try again.

Thanks!

I bypassed the password all together via a registry fix.  I got tired of trying to get apps to run as services.

Re-reading your posts....
I'm guessing that the MC box doesn't have a matching account on the WHS?  Giving it one (and, setting that account as local-only, and giving it the appropriate share-access privs) would solve a lot of problems.
Problem #2 (having to input a password to log on to Windows) can be solved by configuring the MC box to autologon:  <WinKey> + <R> > control userpasswords2
Uncheck "users must enter a username and password to use this computer"  > Apply > select account to be used, and enter password twice > OK.
(@ mcewinter:  you were referring to local autologon, yes?  This method is quite a bit easier than Registry 'fixes.')

Oh, and:  don't play around with GPOs on the WHS, either - Very Bad Things can happen.  General rule with a WHS:  if you can't do it in the Console, you probably shouldn't do it.  ;)

I misread, I was referring to WHS.