Well, I just did it. I edited and copied the file as described in my opening post and all went fine. The menu looks like I wanted it to

...I see the link to the edited menu on pastebin doesn't work. But here's what it looks like:
CODE
[Menu]
Section "Root"
{
Item "Xbox Media Player - XBMC","f:\Apps\XBMC\default.xbe"
Section "System Management"
{
Item "System Settings",ID_Settings
Section "Launch Apps from HD"
{
Line "- Media and File Managers -",2
Item "Dvd2Xbox Media Copier","e:\Apps\Dvd2Xbox\default.xbe"
Item "PxHDD Loader","e:\Apps\HDDLoader\default.xbe"
Item "Xbox File Explorer","e:\Apps\boXplorer\default.xbe"
Line "- Auto Added Items -",2
SortStart
AutoAddItem "e:\Apps\"
SortEnd
}
Item "Game Management on Xbox HD","e:\Apps\HDDLoader\default.xbe"
Item "Game and Media Backup Tool","e:\Apps\DvD2XboX\default.xbe"
Item "Choose a Different Skin",ID_Skins
Item "MS Dashboard ",ID_MS_Dash
}
Item "Reboot Xbox",ID_Quick_Reboot
Item "Power OFF Xbox",ID_Power_Off
}