doc files are rich text files that can have all kinds of text formatting applied in them. txt files are simple ascii text files that only contain text and do not have any formatting for the text.
To get your bold text to appear when you use html tags and set the html property of the TextField to true (or choose the render as html option in the properties panel), you need to assign the text to the textfield using the htmlText property instead of the text property...
txt.text = "<b>Bold</b> text"; // displays <b>Bold</b> text
txt.htmlText = "<b>Bold</b> text"; // displays Bold text
(ps - please don't crosspost: it's a courtesy that saves people from unnecessarily posting responses, which I probably just did)
Sweet. Thanks. It was just that one small line. Sorry about the cross post. I don't usually do that but when I posted something in the main Flash forum the person responding said he didn't know AS2, so I moved the post over here.