The program does that if the file is flagged as a template, but is apparently wrong in this case.
Does this happen with every recent file? If not, you could try changing the name of the file in Windows or the Finder. The next time you try to open it from the recent file list Cubase should tell you it is missing and ask to delete the list entry. When you see it again in the recent file list does it open correctly? If not
Trashing the whole prefs folder is kind of like squashing a bug with a steamroller. You end up squashing a lot of the flora and fauna close by too. The recent files list resides in Defaults.xml in the Cubase settings folder, so deleting that file is a likely fix.
Save your prefs in the preferences dialog before doing this if you have changed the settings Cubase ships with and want to keep them.