Can I Share a Password-Protected PDF File via a File Link?

Yes, you can create a File Link for a password-protected  PDF file. However, if you want to create a Preview-Only link (that does not allow downloading files), then, unfortunately, it will not work. The reason is that for this type of link, a preview-only rendition of the file is generated, and the generation will fail as the content of the file is not accessible without the password.

To create a Preview-Only link for the file, one can save a copy of the file that doesn't prompt for password and then create a Preview-Only link that is also password-protected at the link level: