Okay, first off: Did you download the release version (2.2.1) or a development build (2.3 beta)?
Second, what type of video card do you have and what drivers are you using with that card? If you are using Microsoft drivers (that can come from Windows Update) this can cause problems. In some cases this can be fixed by getting updated drivers direct from the video card manufacturer. (As an example, if you have a NVIDIA video card, don't use the drivers from Windows Update, but instead go to NVIDIA's website and get drivers directly from there for your video card.)
If you still need more help, please give us more information about your hardware and what type of computer (desktop vs. laptop, Dell, HP, etc.) you are running.
Myself, two of my computers multiboot several Operating systems, both including Vista 32 bit and I've found tweaks to make each one run UFO:AI.
Regarding the config.cfg, I don't remember off-hand where Vista puts that for the game, I think it is in a different place than XP, although you can also add parameters to the command-line to launch the game, such as:
ufo.exe +set vid_fullscreen 1
(That's from memory, I could be a little off but I think that's how the command-line options work.)