Kenny Kerr has written an excellent article:
Credential Management with the .NET Framework 2.0
that discusses the Credentials Management API included with Windows XP as well as a method to interact with the API using managed code. He discusses various issues and provides a nice tool called the PromptForCredentials Builder which allows you to establish various criteria for your credential requests and generate code (using Kenny's PromptForCredentials class he built especially for this purpose) for the same. He also mentions SecureString, while a great idea, lacks in general usage at the moment since not every input method (i.e. Textboxes, etc.) allows direct insertion into a SecureString.
Lots of great information and tools here -- you owe yourself a look.
