I found several references to solutions to this problem. They all involve registry hacks -- most suggest to add some new entries to HKEY_CLASSES_ROOT or HKEY_LOCAL_MACHINE/Software/Classes/ (which I believe are equivalent).
Specifically, the following reg hack seems to solve the problem for most folks:
Windows Registry Editor Version 5.00
[HKEY_CLASSES_ROOT\.txt]
@="txtfile"
"Content Type"="text/plain"
"PerceivedType"="text"
[HKEY_CLASSES_ROOT\.txt\PersistentHandler]
@="{5e941d80-bf96-11cd-b579-08002b30bfeb}"
[HKEY_CLASSES_ROOT\.txt\ShellNew]
"ItemName"="@%SystemRoot%\system32\notepad.exe,-470"
"NullFile"=""
Cut and paste into a new .reg file to auto-merge it into your registry. I recommend first checking each of the values/keys shown here in regedit to see what changes (if any) you are making.
However, this did not work for me, as I had a conflicting empty entry in HKEY_CURRENT_USER. In fact, the keys/values were all already in HKEY_CLASSES_ROOT, so the first set of changes didn't do squat. So... I also merged in an identical version of this using HKEY_CURRENT_USER, which worked:
Windows Registry Editor Version 5.00
[HKEY_CURRENT_USER\SOFTWARE\Classes\.txt]
"PerceivedType"="text"
@="txtfile"
"Content Type"="text/plain"
[HKEY_CURRENT_USER\SOFTWARE\Classes\.txt\PersistentHandler]
@="{5e941d80-bf96-11cd-b579-08002b30bfeb}"
[HKEY_CURRENT_USER\SOFTWARE\Classes\.txt\ShellNew]
"ItemName"="@%SystemRoot%\system32\notepad.exe,-470"
"NullFile"=""
try using Ctrl+Shift+N, you may like it :D – Dzung Nguyen – 2011-05-18T00:59:37.280
@nXqd that creates a new directory. – Stijn – 2011-11-20T14:16:30.767