Update 20120918: Version "21.0.1180.89 m" for WinXP at least does allow to open local files using file:/// while the drag and drop functionality will result in "about:blank" in the address bar.
Google Chrome takes security seriously as far as I have seen so far. While other browsers will allow to open file:// links with just a click Chrome won't let you.
However that can be annoying in those intranet applications where you do need access to Windows UNC paths (so common in Corporate Environment)
Actually Chrome does allow you to open the file but you need to drag and drop the link in the address bar. This works of course for Windows OS.
As an example use this link to open the content of your Windows hosts file