With the latest versions of DOSBox, there's no reason to install them elsewhere than in the program files folder. Previous versions (before 0.73 or so IIRC) stored the configuration and screenshots in the program folder by default, but the recent ones have sorted that out, and so are "Vista ready".
Even previous versions would actually work fine in Vista and 7, because when a program tries to write someplace where it has no rights, these Windows versions re-direct it to a user folder called VirtualStore, as a backwards compatibility measure.
But XP didn't have this feature, so if you run an old version of DOSBox in XP as a limited user (which is uncommon since most people run XP as admin), DOSBox wouldn't work right.
Fortunately with the new versions you don't really need to do anything special, regardless of your Windows version.
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