It is an ecommerce security issue for iTunes Store to re-enable purchasing automatically, anybody could use the store as you any time your User was logged in. While this could still happen if you leave your computer unlocked while you are absent in a given session, it should/must not go on across them!!
This popup was added as a convenience to save you typing only, since iTunes closure logs you out (Apple's Store Server itself must do so). But, should a download have not completed and system or app been shutdown it simplifies any resumption of downloads, by remembering the last-used Apple User ID for you.
If a user doesn't logout, this convenience feature becomes an irritant if you don't know or haven't noticed that the store has been abandoned in this state...
Officially "Logging Out" of the iTunes Store removes that last-used Apple ID, eliminating the download-resumption-password prompts. Click your username in the upper right corner of the Store window and choose Sign Out button in the login dialog there.
Changing any other "Store settings" about "downloads" in iTunes Preferences is irrelevant, this is all just about not fully logging out an iTunes User to begin with.