By default the double-click means Edit, not Open.

You can change it in preferences:
https://winscp.net/eng/docs/ui_pref_panels

notice that when I double click on a file on the source side (word, excel etc) that when it opens it doesn't open the corresponding app but instead what looks to be .rtf and all of the data within is jumbled up. When I right click on a file and select open things appear to work fine. Is this normal or should double clicking on a file behave just like opening it?

My environment is :
Windows 10 Enterprise version 1607

Winscp 5.11 build 7715