You can have one web.config file for each folder in your application, but the web.config in the root folder will be your primary config file. The others can only change the settings of certain properties, eg: security settings (access or deny users or roles). Global properties, such as session management, can only be set in the primary web.config file. Visual Studio will tell you if you are trying to alter the wrong settings in sub-files.
Remember to only include the settings that you want to be different from the parent or primary config file - delete everything else.
Cheers