Some people indeed use real windows Notepad or even Vi - but its does not mean you should. Those editors are not suited for doing any work larger than changing 1-2 words.
You will probably find a LOT of people use VI to make some huge changes and even program the whole system / site in it.
VI has syntax highlighting etc, So its just as good as using the code inspector in any IDE.
I use Dreamweaver CS3....but I only use it for coding, not layout...so I might search for something faster.
Oh, and sometimes I edit my files right on the server, with file manager
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