For SQL 2005, delete the file:

C:\Documents and Settings\<USER>\Application Data\Microsoft\Microsoft SQL Server\90\Tools\Shell\mru.dat

For SQL 2008, the file location, format and name changed:

C:\Documents and Settings\<USER>\Application Data\Microsoft\Microsoft SQL Server\100\Tools\Shell\SqlStudio.bin

How to clear the list:

• Shut down all instances of SSMS
• Delete/Rename the file
• Open SSMS