Most probably you forgot to save the workbook. This works for me:
private void ProtectTest()
{
string safeExcelFilePath = @"c:\temp\cp.excel";
string excelFile1 = Path.Combine(safeExcelFilePath, "Book1.xlsx");
Microsoft.Office.Interop.Excel.Application _excel = new _Excel.Application();
Workbook workbook1 = _excel.Workbooks.Open(excelFile1);
Worksheet worksheet1 = workbook1.Worksheets["Sheet1"];
worksheet1.Protect("pwd");
workbook1.Save();
}