IT seems to me you might be able to accomplish by modifying the aspx pages that run the report manager, though note that any upgrades/service packs etc might break it. You say the reports need to be accessed by another piece of software and that's why they need to be accessible. Is there any chance you might be able to change the credentials that the other piece of software uses to access those reports? That way you can all access to that folder for that user and exclude the rest of your users.

-Luke.