First: DragText is immune to setup problems. If you reinstall it in a different directory, it will just start using the DLLs and INI file in the new directory after a reboot. Reinstalling in the same directory will have no net effect.
As to the problem at hand: the most likely reason is that 'drgtxt39.ini' has its "read-only" bit set. It should be on when the INI is in use and off when it is not. For DT, it's on when DT's Settings notebook is open and off when it is closed. So, with the notebook closed, locate the file and see if that's the problem.
Another, much less likely cause is a shortcoming in PM. From what I've read, PM uses a fixed amount of memory for all INI files system-wide. If multiple large INIs were open at the same time, that memory pool might be exhausted causing INI operations to fail. You can test this by opening DT's Settings notebook when no other apps are running.
Finally: in the interests of keeping things in their expected locations, I would suggest that you go to 'x:\sys\apps\drgtxt39' and run DTSetup. You don't have to do anything except press "Install". After a reboot, you can simply delete the duplicate installation's directory (do NOT uninstall it).