This will probably sound crazy but...

So basically what I wanna do here is, I wanna share some of my storage with my friend, across the internet. What I wanna do is have a shared folder he can access over the internet(he lives a few blocks from me and is on the same isp if that makes any difference) I'm sure this is possible, but I also want it to be secure, encrypted if possible, and ideally we would be able to map the drive so he could use it as though it were local.

Also if this is even possible in the first place, would my router block the file transfers and cause any issues, and could it be configured to allow this?

I actually found a program I liked after I posted on here, it's called eftp, I have the server setup and I can transfer files between computers on my network, but how would I access it outside my network from another computer because I'm behind a router, eg say my external ip is 25.123.123.123, and the computer that the ftp is on is 192.168.1.1, how do I make it forward the request to the proper ip on my network?

What it sounds like you want to do you would need to setup a VPN, inside a VPN your computers would appear to be on the same network, including network neighborhood and all. But if you are just routinely transfering files and such I would recommend using an ftp server and client that support ssl (secure socket layer). Be aware that most ISPs including Verizon and Cox cable both block port 21 (ftp port) so when you setup the server make sure you tell it to use another port like 7000 or some other random high number port. There are some free such as Filezilla (excellent program) http://filezilla.sourceforge.net/ . Once you have installed the server you need to punch a hole through windows firewall on that port and configure your router to forward that port to your computers IP in which you are hosting the FTP server. There are also some additional ports which you need to forward but that will be explained in the FTP server instructions. Hope that helps you.