I want to secure my external hard disk by writing sort of ShellExtension. But Shell extension is Workstation Specific.
Is there a way I can write an application that will show a authentication or an extension encrypt my drive data so user will get a failure message when double click on my drive.
1) You should not write a shellextension in .net This causes lots of trouble since then the .net runtime is injected into every application displaying a shell window (like the file open dialog) and if it already uses a different version of the runtime it will likely break.
2) I don't really understand what you are trying to do. But I encrypt my external harddisk with TrueCrypt. That's secure and easy to use.
You can't secure an external harddrive by the use of a shell extension, period.
If you want to keep your data safe, there's only one thing you can do: encrypt it. NTFS has built-in encryption, but I wouldn't recommend using that for an external drive, because of the way the encryption keys are handled.
There's a nice pre-cooked solution for you, though: TrueCrypt. It works, is available for multiple operating systems, has decent speed, and good security. Use it.