First, let me provide you with the outcome I'd like to see.
I unbundle my "application" (pages, code and assemblies) once into a directory. I use the same application (pages, code and assemblies) to drive multiple sites. I apply custom application-specific configuration settings for each site.
Problem is currently IIS takes the web.config from the physical directory. If that's the case, all of my applications would share the same basic configuration. I need to change a value that would normally be in the appSettings section of that web.config and make it specific that site.