How to override some text in the login form located in a block put on a panel?
This sounds like a job for hook_form_alter() and it can be used from either a custom module (eg, MODULENAME_form_alter()) or in this case probably more easily from your theme, eg, something along these lines inside your template.php file:

function THEMENAME_form_alter(&amp;$form, &amp;$form_state, $form_id) {

  switch ($form_id) {

    case 'user_login_block':

      // drupal_set_message('&lt;pre&gt;' . print_r($form, TRUE) . '&lt;/pre&gt;');  // uncomment to see what you have to work with

      $form['name']['#title']='Enter UserID here'; // originally "Username or e-mail"
      $form['pass']['#title']='Enter Secret here'; // originally "Password"

      break;

    // other form ids go here

  }

}


The above (after clearing caches) will turn this:



into this:



If you need to change other text in the form, you can uncomment the drupal_set_message() and look in the form to see what you have to work with and change it appropriately.

ADDITION:

If you want to get rid of both of the links, eg, the Create new account and Request new password you can either do:

unset($form['links']);


or set the access to them to FALSE, eg:

$form['links']['#access']=FALSE;


Lots more information about this can be found in the Drupal Form API Reference.  I would look into the #weight key for changing the position/ordering of elements in the form.