Here is the goal I am trying to accomplish:
1. I need to upload an existing pdf via webpage form and have my webserver/script apply a password to the file upon saving it a directory on my website.
2. When a user clicks on a hyperlink to view the uploaded pdf I want my webserver to enter in the password so that it can be viewed by the visitor without them knowing what the password is. I want to use this method to prevent diversion of the document's content. If the visitor saves the pdf they will not have the password thereby diversion will be prevented.
Is this possible?
It's not even possible with LiveCycle - there is no way to "inject" any password credentials into Acrobat or Reader from a remote server unless you were to write a custom plugin - which given the costs and complexities of working in Protected Mode that's not likely to be realistic unless you're dealing with tens of thousands of fee-paying users.
With certificate security you can tie a PDF to a user's pre-existing digital ID, but they must of course have one to start with, and send you their public key in advance and as you cannot use Acrobat on a server, implementing it would involve significant costs to licence the PDF libraries required.
Using LiveCycle you can tie a PDF to the login credentials of a user on your LiveCycle server, so only they can open the file - however there's no way to tell the person using the login is actually the person assigned to it and LiveCycle is an enterprise product - it's expensive to purchase and you'd have to manage all the user accounts.