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Alright, I have an update for this. I reported this to Spb and they gave me a beta version of Backup. Being adventurous, I tried it. When it restored my system, it did not restore the password protection. So I set the password and after soft or hard resets, my timeout became 7 seconds yet again.
In the registry under Backlight, the LockLevel value was set to 1 and BatteryTimeOut was 7. This timeout corresponds to the timeout while waiting for the password to be entered. You will also see a value called SavedBatteryTimeout or something like that with your correct timeout set. In my case 120.
So, what the PW protection code is doing is saving your timeout and putting in 7 while you're on the PW entry screen. After that, it's supposed to swap back in your original timeout, but for some reason, it cant. I figured it had something to do with the LockLevel as has been mentioned in this thread.
So I did the following:
1) Disabled PW protection and did a hardware soft-reset.
2) Deleted the entire LockLevel *key* (folder) from the BackLight key and did a hardware soft reset. If you don't set a PW, the locklevel key will not be created after a soft reset.
3) Enabled PW protection again and did a hardware soft reset.
The LockLevel key has been re-created and the Locklevel value within is now 0 after soft resets as it should be. The timeout is staying at my set value of 120.
My backlight timeout has now stayed set for about 48 hours and through several software and hardware initiated soft resets.
Hope this is helpful and that it works for others.
Andy
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