I think you are just dealing with the language barrier. When they say the x-cart directory, they mean the home directory of your store.
If your store is located at
http://mysite.com then that is the directory that config.php is in. If your store is at
http://mysite.com/store then that is where it is, get the picture?
The only thing that is confusing sometimes to my clients, is that some hosts will let you log in with ftp to a higher directory than the root of your site. When I log in to my linux server, I have to go to var/www/vhosts/mysite.com/httpdocs to be at the root of the website.