Take a look at this blog post: Shell Extensions - Context Menu. It has code for a simple "wrapper" to some COM hooks to the Windows shell context menu. Put it in the GAC and when you right-click, your menu will be included as a sub-menu of the right-click context menu.
As far as strictly using "Open With..." to make your application show up ONLY for files it can open, that's a little easier. These are managed by Windows using registry keys in two places in the registry:
- HKEY_CURRENT_USER \ Software \ Microsoft \ Windows \ CurrentVersion \ Explorer \ FileExts \ .FileExtension \ OpenWithList (install for current user)
- HKEY_CLASSES_ROOT \ .FileExtension \ OpenWithList (install for all users)
Take a look at some of the existing ones using regedit, then use the Registry class to create a new key for the extension you want.