NJ-DBA (2/2/2011)
No- it was never local system. It was first a domain account with the correct rights to dynamically create SPNs, then another domain account which did not have those rights. Basically the same scenario as changing from LocalSystem, but with a properly priveledged domain account.
Yes, same scenario but has nothing to do with how the service account was modified (at least, not the issues with the SPN record). Of course, you could have other issues with using the services applet to change the service account.