Thanks Nancy,
Not at all obvious - I had no idea about the AppDomain class.
From what I see in the help, you need to create an AppDomainSetup object and set its properties, including some ConfigurationFile, and then use it to create the AppDomain object. I'm afraid I'll end up in the same place, i.e. not knowing the required syntax for paths and directories. I'll have to try it.
I'm starting to think that nobody ever wrote to an XML file in an SDE app...