I forgot to note a few things, sorry.
First off, when I make file association changes now and before, it uses the windows settings not the FXP settings
That is why all my html and php opens in Notepad
Secondly, I dont think its the Xfer mode myself.
What is happeing (it only happens maybe every 6th time and more often when I change the window size

) is it gets all squished together excactly when I click "save"
I finish editing in notepad, click the X and it asks me to save, I click save and at that moment, I see it all get squished together.
Thanks again!