the only reason a web daemon has an API in windows is because the windows registry is opaque, error-prone and in general, a giant piece of shit.
That said, I agree that it would be better if it isn't a thousand lines, and maybe there are better options than XML.
The company I work for is a Microsoft shop (for now, switching to Java sadly), and I've edited a lot of web.configs in servers, sometimes using Notepad, and it wasn't much of a hassle (though I did have to research what to edit beforehand in some cases).
Anything below 7.5 I hope I never have to touch again...
Also, with the API you should be able to configure IIS without restarting it, while changing web.config recycles web apps (in ASP.NET scenario). With load-balancing, however, this is less of an issue.