You can find the flashfxp.ini from within FlashFXP, main menu > Help > About > info tab
Look for the location of the FlashFXP data folder, and yes if you leave the password blank you'll be prompted for it on connect.
For security you can also set an application password that will encrypt your data files using a strong encryption, if you do this you'll need to enter your password every-time you start FlashFXP. From the main menu > Sites > Security > Set Password
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