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can you point me in the direction of some literature that can help in my fight.
Despite the seemingly self-contradictory nature of the terms, Googling on "microsoft security best practices" will give you a lot of web sites.
The thing about having separate users is simple common sense. When everyone logs in with the same user name, then everyone is anonymous. Anonymity is what makes people think they can get away with doing bad things. As soon as you take away anonymity and replace it with accountability, then people start to behave. This is the way it is in the real world, I don't know why the idiot middle-manager who decreed "all students have the same username" would think it'd be any different on computer systems.