You better format your output in the presentation layer.
You can format on selection with T-SQL built-in tools:
SELECT 'A' + RIGHT('000'+ CONVERT(VARCHAR, UserID), 3), UserName, [Password] from Users
But you can also use CLR integrated function also, thus you can make complex formatting using c# for example, having the whole framework behind you. See: http://www.fotia.co.uk/fotia/Blog/2009/05/indispensable-sql-clr-functions.html
I am not sure I got your idea. Especially how the sequence will work. You should think about how you will get the one id from the previous, and the next from the current one. More precisely you need a function that maps 1,2,3... to your id format. If you have this as an algorithm, you can decide on what level you want to implement it. Be aware, that you don't need an identity at all, you will probably need only a primary key, and that one has to be unique only.