I had to add this one since it's making the rounds. The official site for Notepad2 has this to say:
The original Notepad shipped with Windows is probably the handiest program of all times, small, fast, without frills! Notepad2 tries to follow this principle, it's a small, fast and free text editor with syntax highlighting for HTML and other common languages.
Omar likes it enough he posted instructions for how you can actually replace the windows notepad.exe with this here:
He also adds his comments:
Notepad2 is a FANTASTIC app, has a toolbar with buttons ;-), looks like it belongs on XP and is free! You can even set the window to be transparent. It's got a ton of awesome features.