Be sure to edit the location of LÖVE if your love.exe is elsewhere. Also, I think works when right-clicking within a folder as well in Vista and later.
I'm not sure! I think the name comes from the file association, I've installed Lua for Windows so that's why I have that name and icon in the screenshot. You could change the file association with something like FileTypesMan (I'd assume there'd be some way to do it with Windows too). And I have no idea to create some default content in the file sorry. Good luck!