If you have a Windows domain, I would issue logon certificates and store the user certificate in slot 9A of the PIV applet on a Yubikey NEO. To log on, the user inserts their NEO and enters the PIV PIN.
Static passwords are of limited use - all it takes is to open a text editor, press the button and you have a copy of the password. If you must use a static password (for example for a disk encryption password), the recommendation is that you store only part of the passwords in the Yubikey and type the rest.
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