There is a known defect in which the variable does not work with the original MicroStation File Open window, which you've been using based on your screenshot. You can leave it as is if it works for you, even though the File Open list is blank, or you can go to Workspace>Preferences>Look and Feel and make sure the "Use Windows File Open Dialogs" option is checked. Once you check this and reopen MicroStation, the File Open dialog with the Windows feel will appear and the variable does work for this File Open dialog. Unfortunately the variable will work, but not the way you want it to. Using the Windows File Open Dialog, editing the variable will simply add the value of that variable to the list of available file extensions. Deleting or removing an option from the list is not possible. I'm sorry, I know this isn't what you want to hear.
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