If you delete the .htpasswd file from your admin directory and then try to password protect it again you get:

A fatal error has occured:

Unable to open: e:/apache/cgi-bin/lsql2/admin/.htpasswd (No such file or directory) at e:/apache/cgi-bin/lsql2/admin/Links/Tools.pm line 1137.

Please enable debugging in setup for more details.

Could that be changed to create the file if it doesn't exist?