Hi Faizan,
Thank you for your reply.
I have tried to reset the password using the method proposed by you on the instance created from the snapshot and it didn't worked because it was not sysprep-ed for which it gave me an error.
Using the command to see what authentication version I was using on one of the production servers that had the revert password issue I didn't get the version as they are presented on the GCE documentation but I think I got my answer from this output:
GCE Agent started.
Starting AddressManager
Booting on date 06/10/2015 03:21:35
project-name-587 already exists on prod-apps-1a. Setting password.
---------------------------------------------------------
Password from gce-initial-windows-password key applied.
---------------------------------------------------------
Running reg with arguments add HKLM\SOFTWARE\Google\ComputeEngine\State /v ManagedUserAccount /d moonlit-parsec-425 /t REG_SZ /f
--> The operation completed successfully.
From this I deduced that the GCE Agent had reset the existing password on the initial-user to the initial-password and I think this is by design on old authentication method as a safeguard for those that could forget the passwords. I am not sure that I am right about this as being a default action by design because I have found no info on it on the GCE Docs.
I decided instead to use a utility/service account for the services needing this without binding them to the initial user that could have the password reset at reboot.
Please confirm if my assumptions are correct and thank you!