Try changing back the association to Notepad++, and if you lose the context menu again, there, you found the culprit.
Perhaps it's an incompatibility with Notepad++ and Win7 context menus. If changing to Notepad++ disables the New Text Document, let me know of the Path where notepad++.exe resides, and i will make you a reg file to use that instead.
Hello limneos, umm, well it all seems to be working well this morning

I cannot understand why.
Yesterday, When Winpatrol asked permission to change the association (from Notepad++ to MSNotepad) I agreed, and I could then create a new txt file per your reg file.
I tried again now and I can still create a new txt file. Hooray.
Clicking to open it, it opens in Notepad++. Hooray.
I checked the association using Set Associations, and it says Notepad++.
Nevermind, I think Winpatrol has got it's knickers in a twist.
So, at the time of writing all is well.
Maybe you can show me the path in the registry that you corrected.
btw the Program Files path is:
E:\Program Files\Notepad++
but I don't think you need that now.
Thanks again for all your help,
anykey