Hi Donna,
For local intranet, you'd use an ASPX page to authenticate the user and serve up the XML, but you can't rely on Windows Authentication via your domain since people are coming from outside of your domain.
The Security problem with your current approach is spoofing. Someone can create an InfoPath solution and stick it in their cache and then save the XML form to desktop and open it up offline. The solution could be reverse engineered to ignore the user/password, so this is not good. Of course, people can also just save the xml and open in Notepad... :) If you are hiding sensitive information in the xml file, you'll want to at least encrypt it.... better yet, don't put any sensitive data in there!
You need some kind of authentication in your middle-tier. You could create a web page that forces users to login against a server-side database before sending the XML file down, but people can still save the XML and send it to someone, so you lose Information Privacy for the sample form.
Why not just remove the sensitive information in the SampleForm and try to load it from a secure site onload? Then, you can have the user authenticate against the secure site using the built-in dialogs.
In general, you'll have to restrict access, and reduce sensitive data. Good luck.
Patrick Halstead [InfoPath MVP]
InfoPathDev
Patrick Halstead
Project Manager at Qdabra