PHP will only be processed in files that the server (apache or IIS) gives it to process. The default is that only .php or .php3 files are given to the PHP core for processing. However, you can change it so that .html or even .txt are also given to the PHP core to be processed (but there is no reason to).

HTML code in .asp, .php, .html, etc will always be processed by the browser. You don't need a file to be .HTML for html code to work.

I don't have more than 2-3 html files in all 10+ of my sites.

Also, xampp is just like wamp so you are fine. I just thought you did your own install of L.A.M.P. Still, you need to go to tools->folder options->view and uncheck "hide extensions for known file types". I bet you are saving php files as name.php.txt but all you see is "name.php"