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Displaying a file or a folder in the Page Viewer Web Part
Go ahead Add the pageviewer webpart on your portal, Then Click Modify Shared Web Part

To display a web page pageview webpart:
Just select Web Page and type in a url under link and the url will be displayed.

To display folder pageview webpart:
Enter a complete network path for a folder it would look like file://\\servername\foldername\temp

To display a file in pageview webpart:
Enter the file path as mentioned file://\\yourPC\foldername\sharepointDocs\sptest.txt

I found that browse file button is missing in action, I am not sure if it is the browser version or is intentionaly left out by Microsoft.

As per my experience, displaying a file or a folder will only work in IE environment
Most of the times file selected in pageviewer webpart opens either in a separate browser window
Based on few articles on the blogs I have come across, it mentions that it might also open inside the Web Part if the application that opens the file supports inline activation for that file in the browser window, I have not come across this in my environment.

And finally folder and file permissions also place a part in this, so just make sure that the file or folder you are trying to display has good permission structure.

Page Viewer Web Part info from Microsoft also can be found here: http://office.microsoft.com/en-us/sharepointserver/HA100240451033.aspx