Yet again I spoke too soon. As soon as you stop and restart transmission your customised config file is replaced along with the password. Getting close to sending this NAS back and shelling out the extra for one that lets you have some form of actual control.
For anyone else interested in having password protection for third-party apps I have created another idea suggestion, please upvote if you want to see this implemented - http://community.wd.com/t5/Network-Product-Ideas/Ability-to-set-passwords-on-amule-and-transmission-and-any-other/idi-p/862661 .
