I have been in more than a few PR online classes this year and read posts from fellow classmates about not being able to read the PDF lessons on the iTouch. I too could not open a PW protected linked lesson until today. I just updated my iTouch and all Apps before leaving and to my surprise and delight I have a NEW option on the screen that allows me to choose Good Reader to download then open the file!
If you have not yet downloaded Good Reader (a Free APP) you may wish to try it out. Then use Safari to go to your PR classroom and click on the lesson link. Your iTouch screen will suggest an APP to open the file with in the right upper corner. If Good Reader is not displayed click on the 'open in' link in the left upper corner. Select Good Reader and it automatically adds it to your library, opens it and shows a screen to enter the password.
When you return home you can sync your lessons to your home computer and not have to re-download them.