This issue does not depend on any version of SharePoint whatsoever and is not primarily related to SharePoint either. It is a browser security zone setting and dialog box enhancement of Internet Explorer since IE6 SP1 described here: KB 821968.
Yes, you can disable the browser add-on breaking the create and edit new Office documents functionality of SharePoint aka Client Integration.
Yes, you can fiddle with File Types settings, but in the end all of these solutions help breach the security of your PC instead of accurately solving the issue where it can be solved more legitimately.
It's amazing that no-one got deep enough to detail that there's a security setting in the default "Medium" and lower security levels that sets "Launching applications and unsafe files" to "Prompt", while "Local intranet" by default uses the default "Medium-low" security level, where this setting is set to "Enable".
Simply listing your domain in the Local intranet instead of Trusted Sites should solve the issue described here as well as some of the SSO issues out there automatically.