The implementation of the NTLM Security Service Provider (SSP) in Server Pack 4 has been enhanced to allow clients to control which variants of NTLM are used, and to allow servers to control which variants they will accept. 

To change the type of authentication to be used modify the key below with the following values: 

Level 0 - Send LM response and NTLM response; never use NTLMv2 session security 
Level 1 - Use NTLMv2 session security if negotiated 
Level 2 - Send NTLM response only 
Level 3 - Send NTLMv2 response only 
Level 4 - DC refuses LM responses 
Level 5 - DC refuses LM and NTLM responses (accepts only NTLMv2) 

Note: Currently only Windows NT 4.0 (SP4 and greater) support NTLMv2, before making any changes to this key please read the Microsoft Knowledge base article below. 

Key:[HKEY_LOCAL_MACHINE\SYSTEM\CurrentControlSet\Control\Lsa]
Value Name: LMCompatibilityLevel
Data Type: REG_DWORD
Data:0 (default) to 5 as defined above
More info: http://support.microsoft.com/support/kb/articles/q147/7/06.asp