On a linux server this works (but your milage may vary
* Uninstall the FrontPage extensions
* Password protect the folder
* Reinstall the FrontPage extensions.
This is a problem with a newer version of C-Panel. I encountered the same problem last year with a previously password-protected folder. I got the same message Dave did. I followed Rick's 3 steps; but all my theme information disappeared, and FP features, like the counter, were reset. FP linkbars disappeared, fonts changed and the site was a mess!. Of course, I panicked big time.
I would add a fourth step to the above: Open your FP site in FrontPage, click "remote site" and log in. Look in your local _themes folder; then look in the remote _themes folder. You will need to reinstall your theme into the remote site, since reinstalling the FP extensions wiped out your theme info, for some reason. I was able to do so by simply publishing the site. You may need to copy/paste the theme. I reset my counter by right-clicking on the counter, and selecting "front page component properties." You should probably note your current count of views before
you uninstall the FP extensions if you want your counter to continue with an accurate number of viewers.
This is a great big pita! I have done this twice now to change the password annually. This is definitely a problem with the newer version of C-Panel, as I never had to uninstall/reinstall the FP extensions until last year. AAARGH!
Hope this helps.