[John]

You might preclude/alleviate this somehat by including in the forum description a CLEAR explanation of WHY the subforum is protected, HOW select members attain
eligibility to participate in it (and WHO to contact with a password request if a member believes he's eligible)...
and you'd probably need to change the forum description field to allow enough room for sufficient descriptive text ~~ the standard field is limited to 250 characters.

I should think that anyone who installs this hack would explain why it's there, in the form of a thread or an announcement.

To avoid the "in your face, but you can't access it" effect, consider marking any password-protected subforum(s) "inactive" via the AdminCP--}Forums:Edit interface.
This will suppress the title/description display on ForumsHome, will remove the forum(s) from forumjump and from the search selectbox... yet it won't interfere with the
ability of "insiders" to use the "Search this forum" feature (included in the "forumdisplay" template).

If a user tries to access the forum, they'll still be prompted for a password. (Which would kind of give the game away)

Password-protection is "only as good as" the people protecting the password. Bear in mind that it's subject to "social engineering". Ultimately (eventually) you should
EXPECT that someone(s) not "officially" invited will coax a friend (to whom the password is known) into divulging the password.

Obviously.

So, if you decide to employ a pw-protection scheme, you should PLAN (and communicate to included members) in advance:
-- which person(s) has the ability/authority to change the password
-- when/why the password may be changed (how often // for what reason)
-- how the included members will be notified, in the event of a password change
-- who (everyone, or just the leader) is permitted to divulge the password and to invite new "insiders"
-- what penalty will be applied if someone irresponsibly divulges the password to unqualified/uninvited "outsiders"

This hack does exactly what it says it does. It password protects forums. If you can't handle having passwords, don't - stick to user access masks. It's not supposed to replace it, it's here as an alternative.

Honestly, people understand what the hack is for and if they need it, they use it. If anyone wants to release a "Enhanced Diplomatic Solutions to Ease Forum Tension in the Event of Password Protected Forum Usage" hack, be my guest.