I think we've got a case of "mixed Metaphor's".
first of all, A "Flat File" is an ASCII file, not Binary.
so.. the question here is:
Is the file actually ASCII or Binary?

If it is Binary, is it possible that those are "nulls", and not "0"?

Also, check the syntax for the open statement with Binary.
I believe that in excel  2007, to open as binary, the statment reads:
Open FullTRFFileName For binary  Access Read As #1