I don’t think that is correct (I don’t know for a fact) based on how Windows searches for DLL’s.
Yeah I didn't mean to imply that that particular search path order is correct, just that the shell will expand the dot before searching for the file, so ".\notepad.exe" will stop it from finding it in the system32 directory (unless that's the shell's current working directory). If the working directory is "C:\", then the shell will be looking to run a file named "C:\notepad.exe", which only has one possible location.
This kind of behaviour is totally up to the shell though, and has nothing to do with the OS as a whole.
When building your own apps that interact with a file-system, you could implement or not implement similar ideas to make use of the dot.