edit:
I noticed something in the FAQ (
http://hammerwatch.com/forum/index.php?topic=1688.0 )
You could turning on hardware acceleration before reading on.
original:
I am kind of unfit to respond, because I bought the game from GoG instead of Steam. In my version that config.xml is right in the directory, the game installed to.. (...\GOG Games\Hammerwatch\config.xml) but I suppose you looked there already..
But: since nobody else responded here yet, I have a suggestion:
It is a (very) wild guess, but maybe the game only creates the config.xml file after you input your name. Sooo.. you could try copying the one I attached to this post into your game folder. I guess (!) it cant hurt, since you can just erase it again, if it doesnt work, so it should be worth a try at least. As you can probably see when you open it, the config says that it should load in 800x600 windowed mode (to determine if the file is even read by the game) and has all graphics options turned down / switched off (to see if any graphics options cause the game to die upon entering the title screen)
I am not that optimistic about this actually working, but.. as I said, worth a try?^^
best wishes
seth