Searching the Windows Registry I found that the .PDE extension redirects to Processing.Document key. Processing document invokes -> C:\Program Files\arduino-0021\Processing.exe "%1". These registry keys must have been installed during the initial Uno installation process. It is strange that there is no actual Processing.exe file in this directory. A simple copy install of a newer IDE will not change these registry keys, and they will not update when you try to change the file association from the control panel. It would be nice if any of this were documented.
I have tried editing this key from arduino-0021 to arduino-0022 in regedit, but exucuting the IDE changes it back to -0021. I am going to stay with -0021 for the time being.
I would recommend that anyone that wishes to retain the "double click on .pde file to start IDE" functionality avoid updating until this underlying issue is addressed.