Godaddy windows shared hosting on IIS6, but will probably migrate to IIS7 soon.
Is there easy way to setup folder with password protection, so when I try to access secure folder, login dialog pops up?
Does this answer your question? http://help.godaddy.com/article/3977
It requires you to enter your Godaddy hosting username and password to access the directory as a result, so I'm not sure if that's what you want (you did not mention giving access to other users - if it's only for you then this probably works fine, but obviously not if anyone else needs to access it.)