How do I replace Notepad in Windows 7?

Oh, why, of course: Notepad Replacer.

Use the Notepad2 Modifications installer. It works on 32 bit and 64 bit.

This Notepad++ wiki page also has a step-by-step guide for Windows XP and Windows Vista which also works on Windows 7.

If you want to make sure you are using Notepad2, go to a file that you would typically use Notepad2 for and right click > properties. Then where it says "opens with", select change and select Notepad2.