Lost files after using "Last Known Good Configuration"

When rebooting Windows with the "Last Known Good Configuration" option, does
the operating system delete any user files? I'm missing some files after
rebooting with this option, but maybe there are other reaons I can't find the
file. Here's what happened:

When coming out of hibernation mode I was asked to by Windows to change my
logon password. This is a normal requirement on my system. I changed the
password, recorded it in a password-protected Excel spread*** on the same
machine, and then did some work. I later put the machine back in hibernation
mode. Because I was changing the pw in public, I did things fast, so I didn't
do a good job of commiting the pw to memory, consequently I can't logon to
Windows. I tired booting with the "Last Known Good Configuration" option
thinking that maybe, just maybe, my old password would work: it didn't, and
know that I think about it I can see why it would be a bad idea if it did.
The good news is that I did record the pw in an Excel spread***. The bad
news is that for some reason I don't see that password file on my c:\ drive
when I boot the machine with a bootable DOS diskette from Active Data
Recovery Software for accessing NTFS partitions on Windows XP. I do see lots
of other files except some that I know I had created in the past few days.
The odd thing is that I do see recent files on my d:\ drive.

So, does using "Last Known Good Configuration" delete recent user files?
Could there be a problem because I appied "LKGC" when coming out of
hibernation without fully logging into Windows.

If "LKGC" does delete the files are there any utilities that might find the
deleted files or put my configuration back to the state it was in at the time
I changed the password (that is to go forward and possibly recover the lost
files)?

I purchased a copy of Recover Lost Data 2005 from StompSoft at my local
Office Depot thinking that if I can get my ThinkPad disk drive into another
machine at work I might have a chance of recoverying the files if Recover is
any better than Active.

Thanks,
Tom D
.