It sounds as if you may have the extensions hidden (the crazy Windows default setting). In such a case any file you create in notepad will be given the .txt extension, in addition to any other extension you may specify. You can change this in explorer through the view/options menu.

Like cj, and I suspect probably most people here, I hate notepad. There are so many relacements available, many of which are free, that there's no reason to continue to suffer the worst "editor" ever to come out of Microsoft. The best option is to use an editor which supports colour syntax highlighting and create a config to suit Kixtart scripts, if it doesn't already have one.