Error while archiving folder “Deleted items”

I’m running Outlook 2002, in windows XP, SP3 and get the error message with the statement in cannot open the file because its password protected. Question is, (1.)how do I eliminate the required password?
(2.)When I look at the *.pst files I note that Outlook1.pst is over 256K so while it may not be related to the question how can I safely delete and recreate it to save disc space?