1) I routinely create the HKLM REG_SZ value you described on all of my work machines to give myself a 300 second grace period between screen saver init and logon prompt. This has worked fine for me with all versions of Vista that I have applied it to (Ultimate, Enterprise, and Business + SP1 + x86 & x64editions).

It never occurred to me to try to place this in HKCU so I cannot attest to if that should work or what the order of precedence might be in the event of conflicting settings (but I agree that it probably does make more sense as a user setting).

One thing that may differ between what you are describing and my scenario is that our domain GP does not attempt to set this value; it just enforces a more basic rule that a password protected screen saver must be used and limits idle time to a mazimum of 10 minutes. Creating this setting manually definitely gives me the ability to escape the screen saver and bypass the logon screen if I catch it quickly enough.

Does your GP override this setting by any chance? You might try setting it and then running gpupdate to see if it gets changed back (and don't forget that any changes you or the GP make to this setting won't become active until you log off and log back in).