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although it doesn't seems to bring much I'm not against the .txt extension for README but '.md.txt' feels like an horrid idea.

Maybe it's only me but I think it brings more confusion for pretty much no gain. is it markdown ? is it a normal text file? is it a custom extension ?

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.md is a special type of .txt file. Nothing wrong with having a README.md. Let the OS have a default for reading .md files. In Windows that may be Notepad or something completely specialized like markdownpad.com. If we are adding .txt because the target is novice users, then you should have README.txt so they can click on it.

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