Got a response from the PN folks:
Here is what should be happening with the schemes: PN first reads the "master.scheme"
file from the schemes directory. This has an include directive for *.scheme which
causes all of the remaining schemes to be read. When each scheme is read it is
compiled and a .cscheme file is created for it in the user settings directory. With a
standard install on vista this would be:
c:\users\[youruser]\appdata\roaming\echo software\pn2
If that directory doesn't exist, then PN has not been able to create it and you'll
probably need to use the portable edition. This directory should always be writable
for applications, but sadly some IT departments mess this up.
What I did was go into the appdata directory as listed above and deleted all of the files that PN created there, then restarted PN and it seems to work now (ie I can change schemes etc again).
Not sure what the issue was, might have been as a result of upgrading from PN 1 to 2 or something.
The choice of script editor's is definitely up to you - programmer's notepad is indeed built on the scite / scintilla base - although PN provides a lot of extra usefulness via the projects / workspace views - I use it to do something like this:

Basically to do this you create a project using programmer's notepad and then in the project add a 'smart folder' - which basically allows you to create filters of file types, which then allows you to easily navigate / manage the script / layout etc files in your project.
Gives you sort of a visual studio type of project view with easy access to certain types of files.