This is a change in version 1.5.3, moved from General. I don’t think it makes sense to have it in the section that involves managing files and links in notes, because the config folder location determines configuration for the whole vault. It should go back to general.
I can see what you mean. The way I see it, the settings folder is a set of files. And “files and links” doesn’t need to be restricted to only “files and links in notes”.
General has to do with higher level stuff like account, and the app itself. But your settings are mutable, and as much a part of your vault as your notes. I think it makes sense where it is.
This is a strange change. I can kind of see the rationale but I think it makes a lot more sense in General. I wonder if it was done when “General” was still “About” and then not revisited after the name change.