If you have UAC enabled, you need to run Notepad as an administrator to get it to save properly. Two ways to do this.
First, you can open Notepad with admin privileges by using the Run command in the Start menu. Select Run, then type in "Notepad", without quotes, and press Shift+Enter. Once you confirm the UAC message, use Notepad to navigate to wherever your swkotor.ini file is, make the changes, and save it.
Secondly, you can copy the swkotor.ini file to your Desktop, where you can edit it normally without any UAC messages. When you're done, copy the file back to your main KOTOR directory, overwriting the existing one after confirming the UAC message.
- Star Admiral