Oh, if you are running XP, then it sounds like your folders just aren't setup properly. In your C:\EQEmu\ directory, you should have a directory named "logs" and a few other directories like "maps", "quests", "templates", "plugins" and others. If you are getting that error about it not being able to create the log file, then either your directories aren't setup right or you are pointing to the wrong place in the start.bat or something.
As for the issue with the config file, it is probably related to your logs error. Otherwise, maybe you accidentally saved it as a .txt file extension after you edited it.
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