How to set password on external hard disk

One way to do this, would be too download trucrpt and use it to encrypt an entire drive. You might have to reformat the entire drive by doing so but again I could be wrong. Another thing is you might have to have trucrypt installed on any computer your wanting to connect it to to in order to open the drive. A way around that would be too create a very small partition on the external thats just big enough to hold a trucrypt installation. That would probably be the best way.

http://www.truecrypt.org/

Your data will be encrypted and thus you can set a password to protect it. When choosing an encryption style I recommend serpent-twofish.