The ApplicationSettings
class doesn't support saving settings to the app.config file. That's very much by design; applications that run with a properly secured user account (think Vista UAC) do not have write access to the program's installation folder.
You can fight the system with the ConfigurationManager
class. But the trivial workaround is to go into the Settings designer and change the setting's scope to User. If that causes hardships (say, the setting is relevant to every user), you should put your Options feature in a separate program so you can ask for the privilege elevation prompt. Or forego using a setting.