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From your description, it sounds like there was some third-party software installed that tries to log in with the Kiosk account automatically, and now it doesn't know you deleted that account.
Since you really have no way of knowing what all was installed/modified on the existing Windows system, I would recommend a complete reinstall.
I assume that the laptop has a valid COA and product key somewhere on the bottom. Assuming you have no Windows 7 setup DVD, you may download an official Windows 7 .iso and burn it to DVD, then use it for a clean installation and use your product key to activate it. (This is completely legal!)
For more details, please read these excellent tutorials:
Clean Install Windows 7 Clean Install : Factory COA Activation Key EDIT: Alternatively, if your laptop has a factory recovery partition, you can use that to restore it to "brandnew" condition, the way it's shipped from the manufacturer. The disadvantage is that you'll likely have "crapware" along with Windows which PC makers tend to pre-install on the system.