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Not a good idea to assume anything is the same in Windows 7 as it was in XP. Some stuff is very different.
The issue here is that it wants a password to logon after you have left the computer for awhile.
Assuming you have and want to keep a password when you turn it on then you need to remove it from when it wakes up. Go to Control Panel > Power Options >Require a password on wakeup. Set that to require a password or not on wakeup.
There is another setting that is available where you can have a password required when the screen saver has come on but the computer has not gone to sleep. Go to Control Panel > Appearance and Personalization > Personalization > Screen Saver. There is a radio button and if checked it will require the password when you clear the screen saver.
There might be some reasons to not let an XP machine go to sleep since sometimes they don't wakeup properly. Any decent Windows 7 machine should do that well and no reason to not save heat, energy, money, etc.
Click on "Start", then type "netplwiz" into the start menu search box, hit enter, and a dialog box will come up. Then uncheck the checkbox that says "Users must enter a user name and password to user this computer."
You can get to this dialog box other ways but this is the easiest.
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It was your second option that did the trick. Although I did not have to login in after the screensaver went into effect when it woke up I had to click the login screen to open up my desktop which was one additional step I did not want. Thanks for your help as well as others that responded. You all always help me out in time of technology need.