SECURITY: Overriding password protection using OS X disc

Do I understand correctly that the administrator password can be reset by using an OS X install disc?!
The problem is not that I forgot my password, but that anyone can access my information by simply restarting using an OS X disc?
Besides encrypting the home folder, how do I make my system more secure than that?
From Mac Help:
Resetting the original administrator account password
Follow these steps to reset a password when there is only one administrator account on the computer, or if the original administrator account (of several) needs a password reset. "Original" administrator account refers to the one that was created immediately after installing Mac OS X. If the original administrator password is known, the original administrator user may reset the passwords of other administrator accounts using the steps described above.
Start up from a Mac OS X Install CD (one whose version is closest the the version of Mac OS X installed). You should first disable Open Firmware password protection, if it is enabled. Hold the C key as the computer starts.
Choose Reset Password from the Installer menu (or Utilities menu in Mac OS X 10.4 Tiger). Tip: If you don't see this menu or menu choice, you're probably not started from the CD yet.
Select your Mac OS X hard disk volume.
Set the user name of your original administrator account.
Important: Do not select "System Administrator (root)". This is actually a reference to the root user. Do not confuse it with a normal administrator account.

Hi
I believe you can set an open firmware password to prevent someone booting from the OS X disc:
http://docs.info.apple.com/article.html?artnum=106482
At the end of the day though, if someone has physical access to your computer and in particular your hard drive, they could probably access your information anyway by simply removing the hard drive and mounting it in another computer.

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