I have created a custom configuration section for a plugin DLL that stores the .config XML in a separate (from the main executable application) file.

Here's a sample of the custom section class:

using System;   
using System.Configuration;

namespace PluginFramework.MyConfiguration
{

public class MyConfigurationSettings : ConfigurationSection
{
    private Configuration _Config = null;

    #region ConfigurationProperties     
    /// <summary>
    /// A custom XML section for an application's configuration file.
    /// </summary>
    [ConfigurationProperty("MyProjects", IsDefaultCollection = true)]
    public MyProjectConfigurationCollection MyProjects
    {
        get { return (MyProjectConfigurationCollection) base["MyProjects"]; }
    }

    // ...
    #endregion

    /// <summary>
    /// Private Constructor used by our factory method.
    /// </summary>
    private MyConfigurationSettings () : base () {
        // Allow this section to be stored in user.app. By default this is forbidden.
        this.SectionInformation.AllowExeDefinition =
        ConfigurationAllowExeDefinition.MachineToLocalUser;
    }

    // ...

    #region Static Members  
    /// <summary>
    /// Gets the current applications &lt;MyConfigurationSettings&gt; section.
    /// </summary>
    /// <param name="ConfigLevel">
    /// The &lt;ConfigurationUserLevel&gt; that the config file
    /// is retrieved from.
    /// </param>
    /// <returns>
    /// The configuration file's &lt;MyConfigurationSettings&gt; section.
    /// </returns>
    public static MyConfigurationSettings GetSection (ConfigurationUserLevel ConfigLevel) 
    {
        string appDataPath = System.Environment.GetFolderPath(Environment.SpecialFolder.ApplicationData);
        string localDataPath = System.Environment.GetFolderPath(Environment.SpecialFolder.LocalApplicationData);
        System.Configuration.E
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