Windows XP caching passwords

I just ran accross an interesting problem. A client would be logged in and they would go to bring up IE and it would prompt them for a login box for the proxy server. This would mean that their account was locked. They would call the help desk to unlock the password and it would lock again without them doing any key strokes or mouse clicks. Come to fine out the workstation was the cause of this. The way we resolved it for now is to delete the local profile. Has anyone heard of or seen this issue? If so were you able to fix it and find what was the cause of the issue?

Had something similar on Base, we found it was a rogue group policy. ( The person in question was a "tinkerer" and like to "try new things". Needless to say, we locked down his machine tight).