Sometimes its better ot learn by doing than always asking...
Thats a good start, except that file() won't parse the PHP, so they'll be able to edit the PHP code as well, which is not what you want, correct?
So you'll need to do one of these two things:
1) include() the file and capture the output via output buffering
2) read the file into a string ( by file() or fread() ), call eval() like this: eval (" ?> " . $your_code_and_html_here . " <?php "); while output buffering that.
Then you can take the resulting HTML that was generated and stored in your output buffer ( www.php.net/ob_start ) and print that in the textarea.
Links have already been provided for you, you'll probably need htmlspecialchars() to change the > and < into their ASCII equivalents or display in the text area.