Also, if that jumper / contact is closed, on many boards it will not just erase the password, it will also remove the BIOS configuration data. Depending on the system and required settings, the harddisks might not be recognised anymore so it might not even boot. Special settings like boot sequence or IRQ assignments will be lost also, and it's even possible that the CPU / memory timing will be reduced so the system will be severely slowed down.
As has also been said, there are several of these jumpers on a mainboard, some of which can damage the mainboard and other components if set incorrectly. Also, this special jumper usually doesn't have a cap, so you'd be forced to short out random adjacent pins which might not even be jumpers, and short circuits are always bad.
All in all, this is a very stupid thing to do without the right knowledge and true need. And as has been said, it doesn't in any way affect the operating system's passwords. How did you get that false impression? You should really not advise people on things that you don't have at least a minimal clue about yourself.
Shutting down the system improperly can corrupt the filesystem, even though with NTFS that problem is not as big as with FAT. Still, bad idea. OK, in the very early stages of the boot process that doesn't necessarily cause trouble, but never, ever, advise the unknowling to do something that has any potential of creating problems. Handling the system's internal components and shutting down the OS uncleanly are two of these things.
Now, for the original intention: I am, and have always been, running PS under a nonprivileged account. Not only that, but I have installed it under this account. Unlike many other, poorly written, games, PS doesn't require access to anything special. I don't think that is different with XP, even though I don't use XP and thus can't verify that.
Of course, firewall settings and such may need to be changed as privileged user, but then again just running PS in that account doesn't change that, either.
I don't like not having complete control over my PC, which includes all passwords. However, limiting one's own access unless really necessary is a sensible thing to do, and the two don't exclude each other. I'm not even sure if the secret administrator password is of great help. If the user has admin access, then the system will become borked as has been said, and in the rare case of this pertaining to one account (instead of the entire system), one can use the safe mode trick. I'm not even sure the normal user knows about the administrator account so they're not likely to use it, anyway, right?
