HI
you're right, the folder for the default Microsoft Dynamics NAV Web client instance is %systemroot%\inetpub\wwwroot\DynamicsNAV70 folder.
"Web.config File" is the configuration file.
About the Web.config File
The web.config file is an .xml file that you can edit with a text editor, such as Notepad.
Locating the Web.config file
You can have multiple Microsoft Dynamics NAV web server instances on IIS. Each instance has its own web.config file that is stored in the physical path of the application's virtual directory. The path is %systemroot%\inetpub\wwwroot\[VirtualDirectoryName].
Look at this good post by Saurav Dhyani on how to handle more web client
Multiple Web Client in NAV 2013
saurav-nav.blogspot.it/.../multiple-web-client-in-nav-2013.html
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If you have problems try reinstalling web client by following Microsoft's instructions step by step.
the tutorials are here:
Microsoft Dynamics NAV Web Client (and all prerequirements)
msdn.microsoft.com/.../hh168973(v=nav.70).aspx
Installing the Microsoft Dynamics NAV Web Server
msdn.microsoft.com/.../hh167211(v=nav.70).aspx
Configuring Microsoft Dynamics NAV Web Client by Modifying the "Web.config" File
msdn.microsoft.com/.../hh168732(v=nav.70).aspx
Walkthrough: Installing the Microsoft Dynamics NAV Web Client Tiers on Three Computers