After pouring over ProcessMonitor logs I think I found the solution!
You need to change the what the Windows shell (explorer) thinks the "Edit" action for text files. I was able to change this key:
HKEY_LOCAL_MACHINE\SOFTWARE\Classes\SystemFileAssociations\text\shell\edit\command
to something other than Notepad (in my case notepad2). Now Visual Studio's TFS's changeset dialog opens cs files with that editor.
This will probably change the edit option for not just cs files, but everything considered "text'. The registry entries for file associations are pretty complicated. I suspect that it would be possible to disassociate .cs files from this common "text" category and make this change only for cs files (but I'm not that ambitious). Also, I wouldn't be surprised if people's file associations / shell commands (open, edit, etc...) vary from machine to machine (OS versions, tools installed, etc) - so YMMV.