You want to prevent the LM hash for new passwords from being stored in Active Directory. The LM hash is primarily used for backwards compatibility with Windows 95 and 98 clients. The LM hash is susceptible to brute force attacks.
For Windows 2000, you need to create the following Registry key on all domain controllers: HKLM\SYSTEM\CurrentControlSet\Control\Lsa\NoLMHash. Note that this is a key and not a value entry. Also, this is only supported on W2K SP2 and later domain controllers.
For Windows Server 2003, the NoLMHash key has turned into a DWORD value entry under the HKLM\SYSTEM\CurrentControlSet\Control\Lsa key. This value should be set to 1. You can accomplish this by modifying the Default Domain Controller Security Policy as described next.
18.104.22.168 Using a graphical user interface
If you do not have Windows 98 or older clients in your domain, you should consider disabling the storage of the LM password hash for users. The LM hash uses an old algorithm (pre-Windows NT 4.0) and is considered to be relatively weak compared to the NT hash that is also stored.
14.14.4 See Also
MS KB 299656 (How to Prevent Windows from Storing a LAN Manager Hash of Your Password in Active Directory and Local SAM Databases)