One possible requirement to a system I am investigating is rotating passwords. Does such implementation exist in Embedded Compact 7 or 2013?
We have never done that and there is no an out of the box solution for that but it basically should be possible. You can use the Credential Manager API to update the passwords based on your preset list. You find the API documentation on MSDN, it is also valid for WEC 7.
If you mean passwords used to access services from the outside (FTP, telnet etc.) you can use the NTLMSetUserInfo to create/update user credentials, but there is no support for expiring passwords after some time or to force user to create a new password at logon. You can use same credentials in your app and implement such a mechanism, but there is no built-in support for that.