Is the Web.config similar to the application.cfm (or application.cfc)? Does it cascade itself like the application.cfm file?

Similar yes but it is strictly used to house settings for your application/virtual directory.  IIRC, ColdFusion will search down 6-7 directories searching for an application.cfm file.  .NET will do the same (not sure how many dirs deep) but uses an implecit approach in 'stacking' the settings.

Take a look at the global.asax file and its events.  That is a closer match to application.cfm in that it contains some handy events such as Session_Start, Application_BeginRequest... etc.
http://www.csharphelp.com/archives/archive206.html

vr, Rich

I forgot about the global.aspx file... thanks!