Quote from Woz :

Create the links in the same way you would create a shortcut, just with a dir instead.

Shortcuts are just files that windows translates into "links", to do what you are talking about you need to make a symbolic link or "junction point" as MS calls them for NTFS.

More info here:
http://en.wikipedia.org/wiki/NTFS_junction_point

Having game settings (controller settings, message hotkeys, etc) associated with profiles as the OP seems to be asking isn't such a bad idea really - especially considering that LFS seems to hint in that direction with allowing multiple "drivers" but stops short.

Ahh, the blessed Symbolic link, something that I love from Unix OS's, that Microsoft hides and makes creating one about as easy as castrating a pig with a toothpick. If only it could be added to the context menus.

It can - there's some extension for windows explorer that allows it - google it, I had installed it for a windows admin of a client some time back because he couldn't quite grasp the significance of it otherwise; if you can't click it, it don't exist and such.