To open a web folder, you have to go into Internet Explorer and choose
“Open” from the “File” menu. Then you type in the address of the web
folder and check the box “Open as a Web Folder.”

Is there any way to send a link to someone that will automatically
open as a web folder so they do not have to manually open IE, then
manually do a CTRL-O and select “Open as a web folder” and re-enter
the address to open?

For FTP links for example, you can create a link to an FTP site and
when the link is clicked, the user will be taken to that link in their
browser window (prompted for login information if necessary).  When I
try to create a link to a web folder (.url file) and the user clicks
this link, they are given a Page Not Found error. If they follow the
way I described above, they can get in, but this is a hassle because
you have to explain how to open a Web Folder opposed to just telling
someone to click a link.

So how can we do this?

There is a way to open a web folder without using File>Open. However,
it has to be embedded in a web page to do to so, so I don't think it
would help you at all. (see
http://msdn.microsoft.com/library/default.asp?url=/workshop/author/behaviors/overview/WebFolder.asp).

Unfortuntely, as far as I know there is no other way to open a web
folder. As to why, you can check out this long message from the person
who created the feature in IE in the first place:
http://lists.w3.org/Archives/Public/w3c-dist-auth/2000JanMar/0247.html

After reading the information provided in deadlychiapet's comment I
must say that I am completely appalled and surprised by the UI
department's conclusions.

Anyhow.. expounding on the information at the MS web site.. you could
create a page that contained a link to the Web Folder.. and send the
link page to the user.  Or you could create a template for your email
application that implemented the webdav style behaviour.  Both should
be quite simple to do.

-Boo