Just an FYI that we published a new Knowledge Base article for System Center Mobile Device Manager 2008 last week.  I mentioned this issue here last week but we now have an official KB documenting it as well: KB974606 - The Group Policy setting "Code word frequency" for System Center Mobile...

When you disable the Group Policy setting Code word frequency by using Microsoft System Center Mobile Device Manger (MDM) 2008 Group Policy management functionality, some Windows Mobile 6.1 mobile devices may continue to ask the user to enter a code word after a number of incorrect password attempts...