I think the option should say something like "Include in context menu" or something like it rather than "Associate with folders". I believe the latter does not really explain what its functionality is.

You hit the nail on the head, I think that's where I had my problems. I had files created with an earlier version of fsekrit, however, didn't re-create them or import (not directly at least) to the latest version. I should have been more aware that each file is independent and includes a copy of the fsekrit.exe with which it's been created (an earlier version in my case). Lesson: read user instructions more carefully.

Maybe I can suggest something like importing .exe files when appropriate passphrase is entered which may make life easier when updating files from earlier versions.

I tried to export to a .txt file but the exported file still had .exe appended to it. I was able to change the extension to .txt and open the file without any problems, so I believe the problem might be how the program writes the filename when its trying to save to the specified location.