Tweak UI

A small bug: after prolonged use, I've noticed a bug wherein if you Show Desktop (Windows+D), the MMM menus, when right-clicked on the desktop, disappear. But restoring any window fixes this.

Limitations
It's not a limitation per se, but MMM adds a coloured bar on the side, displaying proudly its own name as well as advertising for the MMM+ (which costs Rs 1,200 for lifetime support). Check here for the latest version.

Second, MMM cannot edit the "New" folder list in the context menu. For this, you'll need another application such as Tweak UI.

Tweak UI

It's been there right since Windows 95

Tweak UI is one of Microsoft's PowerToys; it's a great app for customization of XP. The app can do a lot of little tweaks (we won't go into those) for keeping your context menu clutter free. Just remember that under Templates is where you can remove or add document templates of choice. Give it a spin -- you'll love it!