|You have to log on with administrators privileges to change passwords other than you own. You would also need administrators privilege to promote a ordinary user to admin. As password alone does not make a user Admin.|
You can boot up into Safe mode and log in there with the default Administrator and any other users with administrator privileges. You can make the necessary changes there. Ordinary users cannot log in in safe mode.
You can access the files of a deleted user by taking ownership of them or giving ownership to another user. That is done from safe mode as well.
Bear in mind that it is slightly different between Windows XP and Windows Home so make sure you are reading the right section.