My SP 2007 document library has a template in the FORMS folder, and that template is listed in the library as the default template. It works, I can edit it, it's a simple xlsx document.

It's not the first template. I've iterated through a few. All of the templates are in the Forms folder (I can't seem to delete them...)

When I click on "New", the template pops up, just as I would expect. But so does every workbook I ever posted to the library, even though I've deleted every item from the library.

This will confuse users horribly. What am I doing wrong?