config.xml stores some advanced configuration options for PN.
The <userSettings> element defines where PN should store the settings files it creates to store user options. By default this element is not defined, but it can be used to make PN portable (i.e. not store settings in the normal system "Documents and Settings" folder).
If you wanted, for example, to store settings in the "settings" folder on the memory stick you are running PN from, you can use this element like so:
<userSettings path="settings"/>
By default, PN stores a number of settings in the registry for fast access. If you want to use an INI file instead, then you can use the <storeType> element to choose this:
<storeType value="Ini"/>