Thanks for replying. To answer your question - yes it's physically removed from the domain and now joins a workgroup. I am using a local admin account to log in. And yes, domain settings still apply.
If it is physically off the domain, and you ARE using a local account to log on, and it still carries the group policy settings, not only would i be very surprised, but something is wrong.
Indeed. It's a stuck policy. Fortunately, there is a rather ingenious way to fix this problem. Unfortunately, it's not common knowledge. Hopefully this answer will get around to enough sysadmins to fix that.
By the way, this works on all versions of Windows.
This solution is dependent upon the machine-in-question being dis-joined from the domain. If it is NOT dis-joined from the domain via the OS, then this will NOT work.
After the machine is dis-joined from the DC (Domain Controller), login using the local (machine) administrator account.
Go to Start>Run, and type 'cmd' (without the quotes) and press Enter
Type 'gpupdate /force /boot' and press Enter.
Once it's complete, reboot. The old group policy is gone.
Basically, how this works is it (since it gets no policy when you run the command), it applies an empty policy, which effectively removes the stuck policy once and for all.
If you run into problems, 'gpresult /H GPReport.html', if you see the DC or evidence that it pulled a policy; separate your computer from the network that's running on the DC, and plug the machine into a separate network.
(no internet connection is required for this solution, but the link needs to be up, and it needs to have an IP address)