EV3 switch block does not recognize text?
It looks like you have found a bug in the file block. I am guessing that the text after the first line must have the a hidden newline character or something like that that causes it to not the switch block values.

However, I was able to get it working with numeric values. 

Sample data.rtf

1
2
3
4
5


Sample code: 


I also noticed that it doesn't work unless the file has Windows line endings (CRLF). If you are using Notepad in Windows, this is not a problem.