How to create and edit .htaccess and .htpasswd locally on my computer and then upload to my site via ftp?

Solution 1:

.htaccess and .htpasswd files are just text file so you can create them locally then upload them
To create a file starting with '.' on windows see http://www.htaccesstools.com/htaccess-faq/
To create encrypted password for .htpasswd files you can use http://www.htaccesstools.com/htpasswd-generator/

Solution 2:

You can also download the Apache 2.2 binaries and use htpasswd.exe or htdigest.exe to generate the .htpasswd or .htdigest files on windows.