Did you try to enter this manually to your registry or did you copy the text to a reg-file and change your registry with a double-click on the reg-file?
The text you quoted is an export-reg-file of the registry. Just copy & paste this text in a plain editor, correct the path to mp3tag.exe, and save the text to a file with the extension "reg". Then double-click on this file and confirm "that you know what you are doing".
If you want to add this entry manually within regedit you have to create the tree manually and the correct entry within command would be:
C:\yourprogrampath\Mp3tag.exe "%1"
I don't know if it makes any difference but I created the "portable installation" with Mp3Tags installer and not manually. Since version 2.81 Mp3Tag gives a choice to install it portable. Before this you had to create your portable version manually without the help of the installer.
Your profile shows you are still using "Mp3tag Version: 2.35", just a not actualized entry?