The following IBM Support article suggests using System i Navigator to set the "prompting behaviour". You can try to see whether this helps.
http://www-01.ibm.com/support/docview.wss?uid=nas8N1017433
To change user ID and password prompting behavior within Access for Windows is through the Navigator, do the following:
1. Open the System i Navigator.
2. Right-click on the System name. and click on Properties.
3. Click on the connection tab, and select one of the following options:
o Specify Prompt every time. This prompts for a password every time a connection is made to the operating system.
o Specify Use default user id/password prompt, as needed. This prompts for an initial signon and does not prompt again during a Microsoft® Windows® session.
o Specify Use windows user id/password (never prompt). This does not prompt for a user ID or password and uses the Windows logon to sign on the operating system.
o Specify Use Kerberos. This will use the Windows Kerberos ticket for authorization and requires EIM setup on the operating system.
You have the Navigator installed right ?
There is an IBM Support article for the connection string for OLE DB. The .Net connection string properties is possibly similar. BUT, even here there are no details about the suppressing the dialog box from the application.
OLE DB connection properties:
http://www-01.ibm.com/support/docview.wss?uid=nas8N1017400
The following list contains all of the custom properties that are available for the OLE DB providers shipped with iSeries Access for Windows (IBMDA400, IBMDARLA, and IBMDASQL). The release at which each property was added is indicated. For more information about any of these properties, consult the OLE DB technical reference that can be found in the Programmer's Toolkit included with iSeries Access for Windows.