App.config vs. .ini files
Ini files are quite okay in my book. The problem is GetPrivateProfileString() and cousins. Appcompat has turned that into one ugly mutt of an API function. Retrieving a single ini value takes about 50 milliseconds, that's a mountain of time on a modern PC.
But the biggest problem is that you can't control the encoding of the INI file. Windows will always use the system code page to interpret strings. Which is only okay as long as your program doesn't travel far from your desk. If it does, it has a serious risk of producing gibberish when you don't restrict the character set used in your INI file to ASCII.
XML doesn't have this problem, it is well supported by the .NET framework. Whether by using settings or managing your config yourself.
Well, on average, .INI files are probably more compact and in a way more readable to humans. XML is a bit of a pain to read, and its quite verbose.
However, app.config of course is the standard .NET configuration mechanism that is supported in .NET and has lots of hooks and ways to do things. If you go with .INI files, you're basically "rolling your own all the way". Classic case of "reinventing the wheel".
Then again: is there any chance this is a project that started its life before .NET ? Or a port of an existing pre-.NET Windows app where .INI files were the way to go?
There's nothing inherently wrong with .INI files I think - they're just not really suported in .NET anymore, and you're on your own for extending them, handling them etc. And it certainly is a "stumper" if you ever need to bring outside help on board - hardly any .NET developer will have been exposed to .INI files while the .NET config system is fairly widely known and understood.