If you want turn off Password Server, make sure you change the Password Server administrator's password validation method before doing so. This ensures that the administrator can continue to log in to Mac OS X Server.
Follow these steps:
1. Open Workgroup Manager.
2. Select the administrator's account, and open it.
3. Click the Advanced tab.
4. Change the setting for "Use password type" from Password Server to Basic.
5. Reset the administrator's password.