Creating a .reg file for Windows 7

That's not the valid syntax of a registry file, it's missing the header.

Add a line in front with: Windows Registry Editor Version 5.00

Check whether there are invalid characters, if you saved the file in Unicode that could be the problem.

Just compiling all the answers together with some extra info I discovered.

Header on the first line: Windows Registry Editor Version 5.00

• A blank line between keys delimited by "CRLF"
• keys brackets without spaces
• values in double quotes
• integer/word values in hex - lowercase for the letters apparently

Example

Windows Registry Editor Version 5.00

[HKEY_LOCAL_MACHINE\SOFTWARE\MyOrg]

[HKEY_LOCAL_MACHINE\SOFTWARE\MyOrg\MyKey]
"My Value"="Some String"
"My Flag or Integer"=dword:00000001

The allowed encodings also seems to correspond to the Windows API strings which are:

• 8-bit fixed width: Windows-1252 - almost the same as ISO-8859-1
• 16-bit fixed width: UCS-2LE (little endian) - basically the same as UTF-16

Note: when a text editor says "unicode" for the encoding, it probably means UTF-8 which is a variable width encoding not naively compatible with internal Windows.

Note 2 (edit): ASCII is 7-bit and all the processors I know of in use are a power of 2 bits so it's always going to be wrapped in some other ASCII superset like 1252. #thingsyoulearnafteruni

I don't know how those quotes ended up in that file, but I would assume those don't work (maybe you copied it off a Wordpress blog).

Besides anything else, I think it should be like this:

[HKEY_CLASSES_ROOT\Folder\shell\PngCrush]
@="PNG Crush"

[HKEY_CLASSES-ROOT\Folder\shell\PngCrush\command]
@="E:\Programs\PNGCrush\crush.bat %1"