Afaik the installer can be extended with classes that do things.
On INSTALL-action to do could be to
var path = Path.Combine(Environment.GetFolderPath(Environment.SpecialFolder.ApplicationData),
"My app name");
if (!Directory.Exists(path)) Directory.CreateDirectory(path);
And vice-versa on uninstall.
App.config files are related to where the physical assembly is located I think.