One feature of ASP.NET configuration files and the new configuration files for IIS 7.0 is an attribute known as configSource.  For the elements that support this you will have a few different options for dealing with configuration.  This value in this attribute can point to any file path that is lower in hierarchy, but may not be higher or on a different disk.

With this feature you can manage configuration sections in separate files.  Also, in IIS 7.0 you can include another attribute to flag the configuration not to cause an application restart when the configSource file changes.  Perhaps that will be in ASP.NET 2.0, but I have not discovered it yet.  By default it will cause a restart of the application just as web.config changes do.