You do need a passworded account in order to run smp folding. The client uses a service that runs in the background. This service needs a password in order to authenticate with the system.
A few things that can help.
1.) You can set your account to use a password, but also automatically log you in.
See this link for more help with that: http://support.microsoft.com/kb/315231
2.) If you are running a screensaver, and it requires you to use a password to get back in the system, you can change that.
Right click on the desktop and choose properties. Select the screensaver tab. Remove the checkbox for "On resume, password protect."
Hopefully you can get smp folding to the point where it is not even noticeable.