I've just installed the latest 4.2d CE to see if it fixes the problem in 4.2c where the Inline Edit option didn't work at all. Interestingly, in 4.2d, while I can inline edit a TXT file without problem, the Inline edit option is now totally gone for .doc and .docx files. It's just not visible at all.
I know 4.2d isn't officially released yet, but is this by design, or is it waiting to be fixed?