I found out configuration transforms are not a function of msdeploy, they are a function of msbuild. Although not enabled through VS.NET 2010, you can modify non-web based applications to take advantage of configuration transforms. Below are the manual steps to enable configuration transforms in a console application. Other project types should work as well, but I have not tested it.
12:25pm Update: Added missing instruction regarding ProjectConfigFileName
1. Add a new property ProjectConfigFileName that points to your App.Config file
<PropertyGroup> <ProjectConfigFileName>App.config</ProjectConfigFileName> </PropertyGroup>
2. Add a version of App.Config for each configuration, i.e., App.Debug.config To have them nested under App.Config, edit your csproj file,
<None Include="App.Debug.config"> <DependentUpon>App.config</DependentUpon> </None>
3. Import Microsoft.Web.Publishing.targets into your csproj file right after the Microsoft.CSharp.targets import.
<Import Project="$(MSBuildExtensionsPath)\Microsoft\VisualStudio\v10.0\Web\Microsoft.Web.Publishing.targets" />
4. Call the TransformXml task in your AfterBuild target. Note, the BeforeBuild and AfterBuild targets are commented out by default.
<Target Name="AfterBuild">
    <TransformXml Source="@(AppConfigWithTargetPath)"
                  Transform="$(ProjectConfigTransformFileName)"
                  Destination="@(AppConfigWithTargetPath->'$(OutDir)%(TargetPath)')" />
</Target>
The complete console application csproj file,
<?xml version="1.0" encoding="utf-8"?>
<Project ToolsVersion="4.0" DefaultTargets="Build" xmlns="http://schemas.microsoft.com/developer/msbuild/2003">
  <PropertyGroup>
    <Configuration Condition=" '$(Configuration)' == '' ">Debug</Configuration>
    <Platform Condition=" '$(Platform)' == '' ">x86</Platform>
    <ProductVersion>8.0.30703</ProductVersion>
    <SchemaVersion>2.0</SchemaVersion>
    <ProjectGuid>{AAC877C9-6210-4DF8-9BF5-8EB0D902CCAF}</ProjectGuid>
    <OutputType>Exe</OutputType>
    <AppDesignerFolder>Properties</AppDesignerFolder>
    <RootNamespace>ConsoleApplication1</RootNamespace>
    <AssemblyName>ConsoleApplication1</AssemblyName>
    <TargetFrameworkVersion>v4.0</TargetFrameworkVersion>
    <TargetFrameworkProfile>Client</TargetFrameworkProfile>
    <FileAlignment>512</FileAlignment>
  </PropertyGroup>
  <PropertyGroup Condition=" '$(Configuration)|$(Platform)' == 'Debug|x86' ">
    <PlatformTarget>x86</PlatformTarget>
    <DebugSymbols>true</DebugSymbols>
    <DebugType>full</DebugType>
    <Optimize>false</Optimize>
    <OutputPath>bin\Debug\</OutputPath>
    <DefineConstants>DEBUG;TRACE</DefineConstants>
    <ErrorReport>prompt</ErrorReport>
    <WarningLevel>4</WarningLevel>
  </PropertyGroup>
  <PropertyGroup Condition=" '$(Configuration)|$(Platform)' == 'Release|x86' ">
    <PlatformTarget>x86</PlatformTarget>
    <DebugType>pdbonly</DebugType>
    <Optimize>true</Optimize>
    <OutputPath>bin\Release\</OutputPath>
    <DefineConstants>TRACE</DefineConstants>
    <ErrorReport>prompt</ErrorReport>
    <WarningLevel>4</WarningLevel>
  </PropertyGroup>
  <PropertyGroup>
    <ProjectConfigFileName>App.config</ProjectConfigFileName>
  </PropertyGroup>
  <ItemGroup>
    <Reference Include="System" />
    <Reference Include="System.Core" />
    <Reference Include="System.Xml.Linq" />
    <Reference Include="System.Data.DataSetExtensions" />
    <Reference Include="Microsoft.CSharp" />
    <Reference Include="System.Data" />
    <Reference Include="System.Xml" />
  </ItemGroup>
  <ItemGroup>
    <Compile Include="Program.cs" />
    <Compile Include="Properties\AssemblyInfo.cs" />
  </ItemGroup>
  <ItemGroup>
    <None Include="App.config" />
    <None Include="App.Debug.config">
      <DependentUpon>App.config</DependentUpon>
    </None>
    <None Include="App.Release.config">
      <DependentUpon>App.config</DependentUpon>
    </None>
  </ItemGroup>
  <Import Project="$(MSBuildToolsPath)\Microsoft.CSharp.targets" />
  <Import Project="$(MSBuildExtensionsPath)\Microsoft\VisualStudio\v10.0\Web\Microsoft.Web.Publishing.targets" />
  <Target Name="AfterBuild">
    <TransformXml Source="@(AppConfigWithTargetPath)"
                  Transform="$(ProjectConfigTransformFileName)"
                  Destination="@(AppConfigWithTargetPath->'$(OutDir)%(TargetPath)')" />
  </Target>
</Project>
 

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