I don't really think that's a bug per se. What is happening is that when you click or otherwise select (eg single click to select) a password-protected file, Windows 7's preview handler is requesting password access to display the content of the file in the preview window, not in the native app itself. Thus when you provide the password, Windows will preview the file in the preview pane, and will not open it in the native app.
However, if you double-click (or by other method explicitly invoke the file to open in the native app), it will open as such; in this case a password-protected file will open as normal in Excel.
This behaviour should not be exclusive to Excel: it should occur whenever any password-protected file of any type is selected for preview, since this is the default behaviour of the preview handler in Windows 7.
I believe the OP may have noticed it in Excel files simply because those are one of the file types commonly protected by passwords.
To verify, try protecting a Word document or powerpoint slideshow and then previewing it.