I haven't played with this one, but there are many other bootable CDs out there that can get you into a machine without knowing the password. I've used this one in the past and like it:
Offline NT Password & Registry Editor
http://home.eunet.no/pnordahl/ntpasswd/There is also
ERD Commander that was made by Winternals. It has since been bought by Microsoft and is only released to those with Software Assurance contracts. But it has been kept up to date with bootable CDs for both XP and Vista.
There are plenty of others like the
Ophcrack CDs, etc. etc. So I don't think this fits into the category of being an exploitable vuln, but it is always something to remember.
This is why sec pros always recommed the extra measures you mention below like power on passwords, full volume encryption, etc. Physical access is always the worst case scenario. OK... maybe not always, but you get what I'm saying.
Don