Yes it is possible. I have not found a way to protect individual folders, but have for the whole file.
Here's what to do:
Open Outlook (I'm using XP, but it works the same in 2000)
If it's not displayed already, display your folder list. (View->Folder List)
The top folder in the list should say "Outlook Today - [Personal Folders]"
Right click on that folder and go to properties
From there, it is different on different versions. In XP, you find the advanced button and there is a password setting there. Once you password protect the file, if you forget the password, you're f*cked.
Mark