Any editor which has syntax highlighting would do, I have used the following: http://www.flos-freeware.ch/notepad2.html or http://notepad-plus-plus.org/
I fourth Notepad++. Although, if you do ever pay for one - go for PhpED. Once you've used the debugger on that thing, you'll wonder how you ever coded without it .
Notepad ++ is the better option. Its free, easy to use, platform intendant and open source too. You will really like it.
If your running on something non-windows (i.e *nix), stick with vi(m), you wont find anything better.
I was using vim editor. Tried Notepad++ and it wonderful with Windows. There are lots of options like record etc... Thanks guys.
Checkout Aptana Studio Website by searching Google.....Im such a noob here I cant post links yet :-( I have been using it for a few months now...its very good....its built on Eclipse, has a good FTP client built in and lots of plugins, code assist and much more! Totally free!
I use Pspad http://www.pspad.com Its got everything I need including ftp connection for editing files stored on a server.