Was wondering if there is a way to protect the contents of an external hard drive on windows Xp/Vista?
Is it possible to password an external hard drive, such that when its plugged to a system, a password will be required to access it?
While not exactly what your looking for, take a look at Truecrypt. It doesn't have the "prompt for a password at plug-in" that your looking for, but it will do drive encryption.
If it is going to be Windows 7 - you could try bitlocker to go, though this is certainly not going to be acceptable for plugging into Linux, Mac or some earlier Windows installs either.
Personally, I would vote for TrueCrypt as well.