If removing the user.config from the appSettings element solved an error it means there is some kind of typo in user.config that is causing an error. I would try to find and fix that problem then put the attribute back, otherwise you have to keep all settings in web.config
For the file system error makes sure all segments of the path exist, ie does /Data/Sites/1 folder exist? does /Data/Sites/1/systemfiles?
Create any folders if they are missing.
Hope that helps,
Joe