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It works. A few things to note:
In the Google Drive settings, you probably want to turn off "Convert uploads" otherwise Drive wants to turn everything it can into a Google document type.
Secondly, it only works for folders you have synced to your desktop.
Finally, on Windows make sure "Always use this app to open xxx" is selected for a given file type. If you add or change file associations in Windows, you should restart Chrome. Use the Exit menu, don't just click the X on the top right. You can also type chrome://restart in the url bar.