Nothing happens.

This is always false, by design; if you make a mouse click, lines of code get executed. Now, you don't get the expected result; what happens at ... in "Click --> ... --> Browser pops up"?

Click!

You've clicked; so, the driver catches processes this and together with the kernel and window manager it produces a mouse event which is then processed. You can see this being processed, as the icon lights up at the bottom; the task bar informs there that it has received its mouse event. We can be certain that this part of the executed code works.

Locating and launching the executable...

The icon on the task bar has a location specified in its properties; the executable there is found, properties are checked and then finally it is launched. Well, if everything goes right; it could be that locating goes wrong, but then you would get a warning and it could also be that the properties or launching goes wrong, but then you get a warning as well. So, nothing really goes wrong here, if you can see the process; if it did, you would see this by either a warning or an entry in the event logs.

Google Chrome's turn.

So, the executable is launched; now Google Chrome starts to load all its libraries, all its settings, all data, your user profile and some more. That's really a mouthful; so yeah, a lot can go wrong here. Will it tell you what went wrong? Not always. Will some uneducated fix attempt work? Maybe, unlikely.

Where's my browser window?!

It is there, or maybe it isn't; hard to tell. For all we know, as you described the process is present; because you are able to use its tasks. So, it is either stuck on something or something failed; but what. This is where you need to inspect the situation.

Look at the state of the multiple processes, look at their threads; which functions are they stuck at? If you can't see it from the current state as is, you'll need to look at a trace instead; does it write to some log file? Does it result in ACCESS DENIED trying to access some file? Is a file missing? ...?

Can I or anyone tell what went wrong without such details; no, we can't, you'll need to inspect how things work in order to know why it is broken the way it is.

I just want my browser window!

Sometimes you can't fix something that is horribly broke; you need to start over then, that means by trying to replace things from the bottom up from easy to hard:

1. Start a new browser profile.
2. Reinstall the browser.
3. Start a new user profile.
4. Restore a backup.
5. Reinstall your operating system.
6. Buy a new computer.

Up to you whether you want to troubleshoot and fix it or nuke it and start from scratch.

I figured out a hacky workaround, but I would still like to get the answers to my questions above so we can find a proper/less hacky solution.

Beginner-friendly step-by-step below.

Create a dummy .cmd file and set it as the always-open-with app for an extension using the GUI. This causes Windows to create a new file type for the dummy .cmd "app" and associate it with the extension by setting the UserChoice key ProdId value (ex: Application/customJPEG.cmd). Repeat this process for each extension using a uniquely named dummy .cmd file and, bam, we have unique file types associated with each extension (ex: Application/customJPEG.cmd, Application/customPNG.cmd, etc.). We can then customize the icon and open/edit commands independently for each new file type.

See my flowcart in the original question for more information about how Windows chooses the icon for a file.

Note: This workaround is only required for protected extensions like .jpg and .png. See my question above for solutions to non-protected extensions. However, this workaround should work for any extension regardless.

Quick vocab:

• File extension: What comes after the final dot in a filename. .jpg, .jpeg, .png, etc. are all different file extensions.
• File type: A file classification/category. May be associated with one or more file extensions. For example, the JPEG file type may be associated with both the .jpg and .jpeg file extensions.

Note: Image file extensions like .jpg and .png show thumbnails of the image. To see the icon, either create an empty file (so a thumbnail can't be generated) or open an Explorer window and set the View to Details.

Note: You won't see anything change until you refresh the desktop. Make sure to do this after making changes to the registry. See step 6 for details.

Note: If a key seems to be missing in the registry, try refreshing by pressing F5 or View->Refresh. regedit does not stay up to date and requires a refresh to see the latest.

Repeat the steps below for each file extension. Replace .jpg with your file extension and Photoshop with whatever app you want.

1. Create a dummy .cmd file

1. Open Notepad
2. You can leave the file empty
3. File->Save As
4. Use something like customJEPG.cmd as the filename and save

It doesn't matter where you save it or what you name it expect the name must be different for each file type. The name of the dummy .cmd will determine the name of the file type. I recommend including the extension or file type in the name so it is easy to distinguish later.

2. Set the dummy .cmd file as the always-open-with app

1. Right-click a .jpg file
2. Open with->Choose another app
3. Make sure "Always use this app to open .jpg files" is checked
4. Scroll to the bottom and click "More apps ↓"
5. Scroll to the bottom again and click "Look for another app on this PC"
6. Browse to and choose your dummy .cmd file
7. Ignore and close the "This app can't run on your PC" error
8. If the "How do you want to open this file?" window pops up again, make sure your dummy .cmd file is still selected under "Keep using this app" at the top, check "Always use this app to open .jpg files", and hit OK.

If you want multiple file extensions to share the same file type, repeat steps 1-7 above for each extension.

3. Get the new associated file type

1. Open regedit
2. Navigate to:
   HKEY_CURRENT_USER\SOFTWARE\Microsoft\Windows\CurrentVersion\Explorer\FileExts\.jpg\UserChoice
3. Copy/write down the value of ProgId. This is the file type that is now associated with the .jpg extension

The file type should be Applications\{the name of your dummy .cmd}. Example: Applications\customJPEG.cmd.

4. Update the file type to use the correct icon

1. In regedit, navigate to HKEY_CLASSES_ROOT\
2. Now open the key with the same name as your file type. For example, if your file type is Applications\customJEPG.cmd, You will open:
   HKEY_CLASSES_ROOT\Applications\customJEPG.cmd
3. Create a new key inside named DefaultIcon
4. Set the (Default) value of the DefaultIcon key to a path to the icon you want to use. Example:
   E:\Tools\Adobe\Adobe Photoshop CC 2015\Photoshop.exe,30

5. Update the file type to open and edit with Photoshop

1. Open the shell\open\command key inside your file type key. Example:
   HKEY_CLASSES_ROOT\Applications\customJEPG.cmd\shell\open\command
2. Edit the (Default) value so that it points to your Photoshop.exe instead of your dummy .cmd file. Example:
   "E:\Tools\Adobe\Adobe Photoshop CC 2015\Photoshop.exe" "%1"
3. Create the edit\command key inside the shell key if it does not exist. Example:
   HKEY_CLASSES_ROOT\Applications\customJEPG.cmd\shell\edit\command
4. Edit the (Default) value so it has the same value as your open\command key. Example:
   "E:\Tools\Adobe\Adobe Photoshop CC 2015\Photoshop.exe" "%1"

6. Refresh the desktop

You will not see anything change until you refresh the desktop. There are 3 ways to do so:

• In windows 10 run ie4uinit.exe -show. In Windows 7 and 8 run ie4uinit.exe -ClearIconCache. (Thanks to @Tony for this tip.)
• Or, you can simply download and run DesktopRefresh.exe

• Or, you can restart explorer.exe:

  1. Bring up the Task Manager (ctrl+shift+esc)
  2. Go to the details tab and find explorer.exe
  3. Right-click explorer.exe->End task and click End Process
  4. Still in Task Manager go to File->Run new task
  5. Type explorer.exe and hit OK

7. Test it out

1. The correct icons should now be shown for .jpg files.
2. Double clicking a .jpg file should open it in Photoshop.
3. Right-click a .jpg file->Edit should open it in Photoshop.

If the "How do you want to open this file?" window pops up again, make sure your dummy .cmd file is still selected under "Keep using this app" at the top, check "Always use this app to open .jpg files", and hit OK.

8. Delete the dummy .cmd

You can delete your dummy .cmd file. This is optional.

A note about finding icons

Often, an app's .exe will contain multiple icons. For example, the Photoshop.exe contains all the icons for all the different file types it supports. Here's how to find and use these icons:

1. Create a shortcut to the .exe by right-clicking and selecting Create shortcut
2. Right-click the shortcut and select Properties
3. Click the Change Icon button near the bottom
4. You will now see a window like this (but without the numbers):
   
5. The icons are numbered starting from 0. Find the number of the icon you want to use. Instead of counting, you can use the formula (column - 1) * 4 + row - 1. For example, if the icon is in column 6, row 3, (6 - 1) * 4 + 3 - 1 = 22
6. Now you can reference that icon by including the number in the path to the .exe like so:
   C:\Example\Photoshop.exe,23