I am updating an existing application that is installed via a Setup and Deployment Project.
The old application copied a config and a database file into the applicat
Do a Right Click | Add Special Folder | Custom Folder and name it anything you want ( Common Application Data Folder would be good )
In the folder properties grid, change the DefaultLocation attribute to [CommonAppDataFolder].
Add a file to the folder, build and install. You should find your file in C:\ProgramData on Windows 7.
Be advised, I highly reccomend other tools such as InstallShield and WiX over Visual Studio Deployment Projects. The tool is very limited in what it can do and you will eventually hit a brick wall.