All kinds of cool possibilties.
I tried with a div, gave up as soon as I realized it needed a few extra steps compared to dialog.
What I did find interesting with a div, is a div the full size of the browser window and a high z-index, allowed to see the TiddlyWiki, but prevented clicking on it (a div with nothing in it seems au natural transparent, at least in TiddlyWiki).
For what you've done, having a password dialog and then a div in the z-index layer in between the dialog and TiddlyWiki, allowing you to see the TiddlyWiki but not able to do anything with it until you enter your password (at which point the div is hidden), would be pretty nice.