password protected .dmg encrypted disk image folder won't open

Have you tried opening from Disk Utility itself? If it doesn't, the image may be damaged and you'll need to talk with a Mac data recovery specialist.

Compressing, archiving, encrypting, imaging only works as well as the viability of the whole file itself. Putting all your eggs in one basket is generally not recommended with computing. It is better to have something in a physically secure place in real life, than encrypted, and as separate files, than group it all in one file which can become corrupt either due to aging of storage device, or overwriting that happens because of random access of storage device.

Do you still have access to an older Mac running an older version of macOS (such as macOS 10.14 Mojave or earlier) to see whether you can mount this .dmg file? Perhaps even macOS 10.15 Catalina would work as well. More recent versions of macOS are unable to recognize some older drive layouts & file systems.

If your laptop is compatible with an older OS, then you can try installing macOS to an external USB3 drive & boot from that external drive to try mounting that .dmg file. If your internal macOS boot drive has 80GB+ of Free storage space, then you can create a new APFS volume & install an earlier version of macOS to this new APFS volume. You will need to create & use a bootable macOS USB installer.

FYI, you should make a backup of the contents of the encrypted .dmg file because if even one bit of the encrypted .dmg file changes & becomes corrupt, you will be unable to access the encrypted .dmg file's contents (it may even prevent you from mounting it even if unencrypted). Beginning with macOS 11 or 12 the macOS Time Machine backups are automatically encrypted.

Maybe the .dmg is using HFS. The last version of the macOS that could read HFS was Mojave. I created a HFS .dmg in High Sierra and it looks just like your screenshot when viewed in Sonoma.

Interesting! :)👍

https://apple.stackexchange.com/questions/389186/reading-hfs-standard-and-mfs-on-catalina

is an interesting discussion about this very problem. I don't have it, but those who do, should read it and see if it helps.