For configuration data of applications oriented on user interaction there is a place in Windows Directory. However, it is a poor place for configuration data of server applications. A server application is moved between computers, goes from a version to a next version, has a strict policy of maintenance of binaries and configuration files, often launched and stopped together with other applications in a particular order, etc.
An Active Directory solves this problem, however simple configuration files do the job, if they are properly organized.
We recommend to have one configuration file for an application, and we recommend passing its name (and location) as a parameter to this application. In special cases, contents of a configuration file are passed to an application as one string.
Configuration, which has to be changed, while an application is running, should be in a database, which this application reads (either by being prompted or on a regular basis). The database could be a simple file (with proper locking), or even a relational database.