I disabled UAC on my system so it works anywhere for me, but you probably shouldn't do that.
Did you extract it in C:\Users\User\Downloads\ ?
EDIT: Themaister would like an official bug report...
Nope. C:\Emulators\Multi Console\Retroarch_Phoenix.exe. UAC and DEP are both set to disabled. Not sure why extracting it prevents the config file from being altered, yet, let's say I use the emulator at 6:54PM, the config file will update to that time, so something's getting written or at least trying to write to the file, but doesn't complete. I even created a new directory but to no avail. Unfortunately, this machine only has two partitions on one HDD.
Edit: Creating a new directory does nothing, can you send me your config file and see if it works? The Read Only attribute cannot be disabled, it never saves.