For historical reasons, the MZ is interpreted as the header of a 16-bit executable. When you run something under CMD (hopefully I'm getting this right, it's been a few years) it first runs it using the CreateProcess API, which just tries to run the file as an executable, regardless of extension, then it falls back to ShellExecute if it doesn't have an MZ header, which dispatches based on extension.

Basically you get a dialog saying the text file isn't a compatible executable. If you change the MZ to anything else, it opens in notepad.