Most of the times its located in :
C:\Windows\SYSMSI\SSEE\MSSQL.2005\MSSQL\Data
If it needs shrinking do the following :-
Backup the database using SQL Management. Connect to the instance using
\\.\pipe\MSSQL$MICROSOFT##SSEE\sql\query
as the server name.
Once backed up right click on the Database Sharepoint Config and click new query.
Execute each of the following querys in turn
BACKUP LOG [Sharepoint_Config_blahblahblah] TO DISK='D:\temp\configLogBackup.bak'
GO
BACKUP LOG [Sharepoint_Config_blahblahblah] WITH TRUNCATE_ONLY
USE [Sharepoint_Config_blahblahblah]
GO
DBCC SHRINKFILE (N'Sharepoint_Config_blahblahblah_log' , 50)
GO