Erasing the drive as usually done doesn't necessarily clear the root sector, and if the "program" is installed in the root sector above the position that will be occupied when a new boot/sys is written, it likely will survive the cleaning. That particular bit of information suggests that the program installs as a "root kit" - a legitimate(?) use of what sometimes is one of the nastiest of malware techniques.

Password protection of individual files/folders in Windows is sort of a double-edged sword. It protects your data from others, but there are several places where what would ordinarily be minor - and recoverable - file corruption can render all password protected files completely unrecoverable even by you. The file itself can drop a bit. The "key" file that knows how to unencrypt the file can get lost. The user def file that tells which user the password is for can get mangled. etc. etc. etc. ... (An encrypted file that's part of a backup is almost never readable in a restore - at least in my experience.)

Windows encryption, in recent versions, is very strong so if any accident happens, the file is COMPLETELY AND PERMANENTLY LOST.

If you have so much information that you have a lot of things needing passwording and encryption, you've just got to accept the risk; but for ordinary use I'd suggest that any individual files worth encrypting should be stored as an unencrypted backup off the machine just in case. (Burn a CD, etc, lock it up somewhere remote from the machine, and then apply the password/encryption only to the "working" copy left on the machine.)

It gets to be cumbersome, but obviously anything you need to protect with a password is valuable enough to merit a little extra care in backup, as well as in protection(?).

Using a logon password, especially for an administrator account, is an entirely different matter. It may be inconvenient to work around a lost or corrupted logon password, but no data is likely to be lost. Encryption of messages during transmission is also safe, since the source file remains unaffected if something gets lost in the transmission.

John