This doesn't work for me either (8.5.2 FP1)...

Subject:

For all other applications, the default browser launch just fine. Lotus Notes unfortunately can't launch the browser at all. It "do something" and the screen flicker briefly, but no browser is launched. The Web Browser Properties setting is then ...

...."Use the browser I have set as the default for this operating system"

The biggest impact from this is of course that I can't launch links in mails or documents. Since I can't copy the link's address to the clipboard either (Lotus, hint hint!), I must turn to the next point.
Since the point above doesn't work, I have found out that I can use the embedded browser;

... and manually set the "Use the browser embedded in this client". The con is that I have to do this several times per day!! I suspect it has something to do with Location-switching. And for those who wonder whether we have a policy for this, the policy says "Leave as is".