Asking for password when adding new folder in /Users/.../Sites/?
Easy fix. Open Terminal.app and type the following command:

sudo chmod -R -N /Users/*/Sites
sudo chmod -R 744 /Users/*/Sites


(edit: Added -R to recursively change permissions)
(edit: Kudos to ughoavgfhwless for pointing out the -N flag to reset the ACLs)

You will be asked for your password. Enter it (keep in mind it won't show up in terminal). Now, assuming there isn't a more serious issue with your OS X installation, this will correct the permissions on all of the users sites folders. (If you installed OS X on a case-sensitive HFS partition, you need to make sure the case of the command matches the case of the directories. If you don't know about this, it's safe to assume you can ignore this and proceed with the above listed command.)

Good luck and happy chmoding!