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SQL Server 7 does not allow users with a Security Admin role to update passwords without knowing the old password. You can create a copy of sp_password so that the user does not have to have System Admin privileges.
Replace this code:
-- CHECK PERMISSIONS -- IF (not is_srvrolemember('sysadmin') = 1) AND not @self = 1 with this: -- CHECK PERMISSIONS -- IF (not is_srvrolemember('sysadmin') = 1) AND (not is_srvrolemember('securityadmin') = 1) AND not @self = 1
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