I spoke too soon. There was still one problem.
If excel is not open, double clicking a multi word file name will open
okay.
But if excel is already open, I get the string of messages about not
finding a file with a single word from the file name.

It seems, so far that is, that I have been able to fix this.

After running excel /regserver, the OPEN entry in Folder Options
says:
"C:\Program Files\Microsoft Office\OFFICE11\EXCEL.EXE" /e

But after opening a few files in excel this invisibly got changed to
"C:\Program Files\Microsoft Office\OFFICE11\EXCEL.EXE" /e %1
Strange, but true.

I think the %1 needs to have double quotes around it so I changed it
to
"C:\Program Files\Microsoft Office\OFFICE11\EXCEL.EXE" /e "%1"

And now everything seems to be working.
I wonder why /regserver didn't put in the "%1"
and why excel put it on without double quotes.

I just checked this setting on several other computers
On a normal office 2007 only computer there is no %1, just the /e
On a normal office 2003 only computer there is no %1, just the /e
On a computer with 03 and 07 co-installed that works fine and has
never had any problems, with 03 as the default excel app, the Folder
Options dialog for the XLS extension has a button that says RESTORE in
place of the ADVANCED button. So I didn't mess with it.

Brian