Note: If you have not already tried to make your logon local by going to account settings described in paragraph 3 below. Do that first, if it doesn't work, then go to Group Policy.
1) My Local Group Policy (gpedit) screen was a little different, but I figured it out. It goes: Local Computer Policy> Computer Configuration> Windows Settings> Security Settings> Local Policies> User Rights Assignment. From there, there are a long list of policies. Go to 'Deny log on locally,' left click and click on properties. Mine had a long identification set, which I removed. It also had 'guest' and that should probably be removed as well. Open the Explain tab and it will explain it all. The default for that setting is None.
2) There are also instructions on this page to block access. To get there take almost the same route- Local Computer Policy> Computer Configuration> Windows Settings> Security Settings> Local Policies> Security Options>Accounts:Block Microsoft. Access the same as above and carefully read the Explain Tab. After doing so myself I was leery of making changes. It wasn't necessary in order to change back to Local logging on. It may be in order to keep it local, but I want to be able to work online if I want to, but after I have logged on to my computer. So I am still considering if I will change this one from the default.
3) Having made the changes, Open Control Panel > All Control Panel Items > User Accounts and click on 'Make changes to my account PC settings' There should be the option to sign in with a Local Account. Click on that and follow the prompts. You will need to start out with the MSN password and then it will ask you to choose and enter your local password. It will reboot, so before you do this, close anything that is not saved because it will log off.
What has me puzzled is how the User Rights Assignment. got changed. I was logging on locally, then last night I shut down and today it had reverted to the MSN logon. The first time it changed over easily to local access. without all of this, this time it didn't go so easily. Good thing I have an old Vista computer where I keep a copy of my password vault.