1. Add this to the CFBundleDocumentTypes array in /Applications/TextEdit.app/Contents/Info.plist:

   <dict>
       <key>CFBundleTypeExtensions</key>
       <array>
           <string>url</string>
       </array>
   </dict>
   

2. /System/Library/Frameworks/CoreServices.framework/Versions/A/Frameworks/LaunchServices.framework/Versions/A/Support/lsregister -f /Applications/TextEdit.app/

3. killall Finder
4. Change the default application back to Safari in Finder

If the application is signed, modifying an Info.plist invalidates the code signature. It also makes a few applications like TextEdit and WriteRoom crash on launch on 10.8.

Do you mean the submenu you get when right-clicking on a document? If so, it's generated automatically by Launch Services based on the document types your applications claim to be able to handle. If you look inside an application package (right-click the application, and select Show Package Contents), inside the Contents folder there'll be an Info.plist file with various information about the application, including an array of document types it can open (see Apple's dev documentation here).

TLDR; if the application handles that type of document, it should already be listed; if not, I don't know a way to add it manually.

It has nothing to do with your service in particular. Services are displayed directly in the Finder context menu if there are four or fewer relevant services available, and in a submenu if there are five or more:

Note the extended “Services” submenu has also been merged to become part of the general right-click menu because it dropped under 5 items. That’s because the “Services” section becomes it’s own dedicated submenu once more than four items or Service options are available for a given file, filetype, or folder, but with under five items, the Services menu blends into the general right-click menu of OS X.

-- http://osxdaily.com/2013/05/14/remove-services-contextual-menu-mac-os-x/