I don't know why I haven't noticed this before but Clemens has posted exactly what all Service Component developers should know about configuring an ES application to find it's own .Config file.  I have seen this setting a thousand times and never looked it up.  I probably just ignored it because of the Windows 2000 Professional machine I use at work for development.  The funny thing is I also develop on a XP lap top and have deployed all of my ES apps to Windows 2003 boxes.