Custom extensions are not recognized (4250331)

Custom extension that have been added to a previous version of Toad for SQL Server in the following way are not being recognized by SQL Server 3.2:

1. Create a simple query (select * from [table name]) then Save As and change the extension to FNC instead of SQL
2. Go to Tools | Options...
3. Select Environment | Extension
4. Click on Add then type a 3 digit extension (ie FNC) then click OK
5. Go to File | Open File and select the file you created in step 1.
6. Notice the file opens but with the following heading:

"Spreadsheet [file name]. FNC"

The file opens but there is no syntax higlighting.