I have a Mac running Lion, and a Windows 7 virtual machine running under VMware 4. The problem is that the password was lost in a phone upgrade.

Is there any way using command line or other tools on the host to reset the password?

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Do you mean your Windows account/login password, or a password to the encrypted virtual machine? – Daniel Beck Feb 1 at 17:55
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Grab the NTPassword reset ISO from here and mount it inside your VM. Reboot the VM and boot to the ISO, follow the instructions for resetting the Administrator account (just blank it as opposed to creating a new one), and reboot. You can now log in with the Administrator account (no password) and change it the usual way through the Control Panel.

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