You need to place the SmarThink.ini in the SmarThink data directory.
The data directory depends on the windows version and language.
Under vista or windows 7 you can find the data directory via: %programdata%\Lokasoft\SmarThink1.20 Which resolves to: c:\ProgramData\Lokasoft\SmarThink1.20
Under windows xp its usually under: C:\Documents and Settings\All Users\Application Data\SmarThink1.20