>I think you may have just answered the question. I thought the config file only needed to be in the project directory. Does it need to be in the exe (runtime) directory?

It has to be there or you can use -C command-line switch to point to the config.fpw file of your choice.
See http://msdn.microsoft.com/library/default.asp?url=/library/en-us/fox7help/html/concommand_line_switches.asp