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Filling in the needed information, in this case just the User password, is very simple, but for using this Automator action we need to bundle it with a couple of others.
As the action requires Files/Folders input, the best way is to put "Get Specified Finder Items" or "Ask for Finder Items". I am using the first one because it gives me the opportunities of selecting multiple PDF files from a number of different locations.
These two actions combined in a workflow could be just enough, but from my experience there is a need for a better finish. By just combining "Get Specified Finder Items" and "Add Aux Info to PDF", all the newly created password protected PDF files will be automatically placed in the /tmp directory on your computer. It is much better to add "Move Finder Items" as the third action so you get this workflow:

This workflow now password protects chosen PDF files and moves them to the location you specify. The only negative aspect I came across in the process is that by using the Automator action you cannot specify the output file name. If you were thinking that this is done by enabling "Replace existing files" checkbox of the "Move Finder Items" action, you are wrong as this is just a move action. The output file gets a random file name such as pdfauxinfo.k365vaq6.pdf. Quite possibly there is an Automator action that can take the file name and rename it, but I didn't use it.
Accessing password protected PDF files
Opening a newly created password protected file in Preview:


Opening a newly created password protected file in Adobe Reader 8.1.0:


Opening a newly created password protected file in Adobe Reader 8.1.0 on Microsoft Windows Vista:


This is it. A free way of creating password protected PDF files on Mac OS X Tiger.
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