Yes. The file must have a .cfg extension and not a .txt extension. You can open the .cfg file in notepad and save it, but you can't save as because that will save it as a text file. The file extension is hidden by the way.
If you mess it up simply save your mods then delete the mod folder and then launch the game. A new mod folder will be re-generated and them you can put your mods back in. The text in the file should look something like this:
Priority 500
PackedFile *.package
PackedFile *\*.package
I added an additional "PackedFile *\*\*.package" so that it will read two folders down. You can add more.