Well from what I've seen to configure wine the config file is actually:
~/.wine/config
Not wine.conf. I'm on Suse 9.1 and distributions may vary, etc. but I downloaded the version of wine recommended on the winetools site, and I used winetools to automate generation of the "fake windows" environment and configuration files. I recommend you do the same.
Winetools can be had from:
http://www.von-thadden.de/Joachim/WineTools/