John,
This is handled by the DOCICON.XML file in the C:\Program
Files\Microsoft Shared\web server extensions\60\template\xml directory.

find the .rtf extension in the ByExtension area, then copy the
EditText and OpenControl parameters from DOC's entry, so you get:
Mapping Key="rtf" Value="icrtf.gif" EditText="Microsoft Office Word"
OpenControl="SharePoint.OpenDocuments"/

Then, do an iisreset, and Word will now open the RTF's and you can edit
them just as you would a DOC.

You could also, in that same line, change the EditText to say
"Microsoft Office Word (RTF)", so the pulldown says "Open in Microsoft
Office Word (RTF)", for a reminder of the file format, and/or change
the document icon to the Word icon, so it doesn't look different.

Also, note that this only works because Word can open an .rtf. Check
the ByProgID section. So, basically, if Word can open a file type,
you can map the extension to be handled by Word. Compare entries in
ByExtension and ByProgID and you'll see how that works.

Ben