spf, that's normal and it means it's working as it should. No one should have access to your googlecheckout folder unless authenticated.

The installation instructions need some serious rewriting. I know you probably think there's something wrong because the instructions say something like type ...responsehandler.php in your browser, if you see nothing proceed, if you get some error...
That's only true before you set authentication over .htaccess, in which case you will always be prompted for a user and password.