Regarding using multiple monitors, just make sure your XP Taskbar Properties 'Group similar taskbar buttons' is Unchecked.
I use two monitors and have not had to do anything to my Files Type tab, and as long as the icons are not grouped I can have different workbooks open on different monitors, but all running in one instance of Excel.
In my setting for XLS files - Advanced tab, Open action, I have the following:
Perhaps someone else can advise on why the change you made appears not to be reversible.
If you don't get an answer here, then the XP forum might help, as your issue with the %1 is not specific to Excel