Why is the Lock feature not working on my folder?
If your goal is to prevent someone accidentally stumbling into a folder, making the folder un-readable through the Finder dialog would likely accomplish that goal (and without needing a password — one is unlikely to "accidentally" open the File Info dialog, change the permissions settings, then open the folder.

If you are concerned about some snooping that isn't quite accidental, you really need more protection. I'd recommend using an encrypted disk image. That way you can give your folder real password protection, and the password you use doesn't have to be the system password (which users of your computer might need to know).