Generally, it's best to put config files into version control if they store significant information.
If you're talking ASP.NET sites here, I'd definitely place the config file in SVN. You can play a few tricks in ASP.NET config files using
allowOverride (see How to: Lock ASP.NET Configuration Settings) which may allow you to force a local debug version to use different settings from the final production version despite using the same config file: just mount the website as a sub-directory in the local debug IIS and lock a few sections you wish to override. And of course, you could just include two config keys for particularly tricky bits and check in code which to load.
For PHP, the principle is the same. However, you'll need different tricks. For instance, you might write the config file such that it checks some global system environment variable, and then overrides selected settings if it's a dev-machine. For instance, I've a setup similar to this where I check the IP address; all dev-machines are in a particular IP-block; unless a machine is in that IP block, it's considered a production machine (which doesn't enable various tracing etc. options). You could also check the host name, or simply any old environment variable which all developers agree to set on their development machines.