Nice find Simon! I'm also on 4.0.30 and 128 << 10 is indeed the current value. Above that is a commented line with the value set at 192 << 10.
It's nice to know more people are facing this.
But the workaround can't delete the new file, can it?
It would suck to work on the file and lose the changes (even if I have a copy of the old file). :P
I don't know for sure Dan. My guess is that it doesn't seem normal that a newly generated file can overwrite a file with the same name without warning. If you try the workaround you'll see that it works, but it doesn't seem safe!
You better try Simon's finding if you are on the old version.
EDIT: It seems there's another workaround you can do without altering the file_settings value.
After opening your file, just press ALT + X to open the command lister and select toggle_virtual_whitespace.