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IBM provides planning information for changing this system value in Chapter 3 of the Security Reference manual beginning in V5R4.
The main considerations are ensuring that the clients connecting to the NetServer don't require the old Lanman password. In addition, if you've customized your sign-on screen, you'll have to customize the version that provides a 128-character password field. This field, as well as the password field on CHGPWD, CRTUSRPRF and CHGUSRPRF commands all switch to allow 128-character passwords.
Finally, changing the levels requires an IPL before they take affect. While the version of the software the clients are running does need consideration, the release of the server (i5/OS), shouldn't be an issue.
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