Windows – How to password-protect a folder in Windows without using any third-party app

Truecrypt is actually quite a good approach.

It has a "cache recently used passwords" option, so that if you mount your file, then un-mount it, the mount it again - it won't ask for the password the second time to save you time. You can (and by the sounds of things want to) turn this off, and which point it probably does what you want.

I wouldn't think so because the files exist locally on the hdd. If the dropbox process was terminated they'd still be on the local disk and accessible so you couldn't rely on dropbox to enforce passwords.

The approach I would take is

a) full disk / system encryption with truecrypt (if device gets stolen)

b) password locking of systems when unattended for x minutes / hibernate after y

c) if worried about the security of files within dropbox - something like http://stefanstools.sourceforge.net/CryptSync.html - encrypt individual files / filenames within dropbox mirrored to local unencrypted folder (that would be protected with true crypt full disk)