The password thing does work correctly, many people use it, the problem is that you aren't following what I am saying.
If I go to your password protected for enter the correct password and choose not to have to enter it again, ayone using my computer will not be asked for the password again when enetring that forum as a cookie will be stored on my computer.
However, if someone using another computer tries to eneter the password protected forum they will be propted for the password.
If multiple people use your computer then when logging into the forum choose not to automactiaccly be mogged into that forum next time, you will then be asked for the password when returning to that forum.
As you have already selected the auto method you now need to clean out your cookies so you will be asked for the password again. If this doesn't happen you have setup the forum wrong.