My Create mantra is a little different to yours. The MSDN documentation is a little confusing regarding the use of the application name and command line parameters used by CreateProcess (which is what Create uses under the hood). I pass the full absolute path including the executable name as the "application name" parameter and I pass what you would likely type on the command line for the command line parameter (generally the executable name sans extension followed by command line parameters). So something like:

use strict;
use warnings;
use Win32::Process qw();

my $app = "$ENV{SystemRoot}\\Notepad.exe";
my $cmd = 'Notepad "my file.txt"';
my $proc;
my $flags = Win32::Process::NORMAL_PRIORITY_CLASS();
my $startDir = 'c:\\tmp';

Win32::Process::Create($proc, $app, $cmd, 0, $flags, $startDir);
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It may be that providing the full command line for the application name is causing grief in some cases?