Q: Can an iBook I've created be restricted to people with a password?

You seem to be asking if you can upload a free book to the iBooksStore, - which would only be accessable to  whom so ever you issue a password.

I know that books created using iBooks Author can have a password applied, but  I am sure this is only for "Work in Progress" progress books and not included as a function when  the  files is exported to .ibooks format for subitting to the iBooks Store.

Another option to  allow  a group of  people to  have  the  book, - is to simply  export the book as "yourbooksname.ibooks" - then use  a "cloud" online  storage facility like Dropbox - which is a free download with a minimum 2 gigabyte or free space.  When you  have  an account,  simply upload your book, and you can  create a link which  you email to your group... who can then download the book. A good thing about Dropbox, is that it offers the option to open the file in iBooks - which   makes it easy for  Mac computer / iPad   users.