What youve listed is part of a config file. The 'root directory' is simply the FOLDER KOTOR/2 is installed in
ie. from post #1
7. Once that file is downloaded, place it in your KotOR II's root file directory, eg: C:\Program Files\LucasArts\SWKotOR2.
please re-read posts 1 and 2 of this thread. Qliveur also has links for securom fixes, which may address your emulation errors.