Unfortunately a password expiration policy is required for all Rally UserID's. This is a commonly-requested feature however, to allow for more relaxed policies for automation users. This idea:
Change password policy for single user account
On Rally Ideas corresponds to this feature request. I'd encourage for you and your teammates to vote on it to help raise visibility with Rally's product team.
Also - you may wish to explore porting your automation code to one of Rally's REST-based toolkits.
Versions 2.0 and higher of Rally's Webservices will not include SOAP-based services. While SOAP will continue to be available in Webservices 1.x for a full year following the soon-to-be released Webservices 2.0, customers requiring new/updated Rally functionality will find that updates are no longer available in SOAP starting with version 2.0.