i) Password cachingPassword caching is a function of the client, not the server. Both OS/2 and Windows clients allow passwords to be cached, but this is easily disabled. In a secure environment, it is always best to force network logon and validation by removing password caching. Newer versions of Windows (e.g. NT, 2K, XP) do NOT, by default, allow password caching, so you may already be OK here.
ii) Security of files
If you are using the OS/2 Warp Server Entry Edition, then access control lists for the file systems are held in the NET.ACC file per server. This allows moderate performance, but means that physical access to the server would mean security compromised - no logon is required to access files on the server console, and the harddisk can be taken out and read in another machine (assuming it supports FAT/HPFS).
If you are using the Advanced server, then the access control lists are held on the filesystem for HPFS (and JFS if using ACP) using HPFS386. If local security is not installed, then physical access to the server remains a concern, but at least directories with ACLs on cannot be read in another computer - the ACLs have to match the running NET.ACC on the domain controller. So, if you take a HPFS386 formatted disk and stick it even in another OS/2 server, you will not be able to read anything. (If you need to lower the HPFS386 protection, e.g. to do a system upgrade, then run THIN386 which lowers the security).
If local security is installed, then a valid domain logon is required on the server to even access/modify ACL protected directories on the server.
All in all though, it is simply best to prevent physical access to the server and keep it locked away - maybe with the lockup facility running to prevent casual access.
Post if there is anything else specific you wish to know about...
Regards,
M