Yeah it's always been 0 (empty file) - it's for your own customizations.
Try just creating a waypoints.ini in your MQ2 dir, then see if it runs OK. If that's the case, I'll update the patcher to at least include a comment at top of file so it doesn't choke on it.
Then I guess you did it wrong. I tested multiple times, and like the readme that shows says specifically, to select the specific folder.
I.e., hell, I just did it again to be sure, on a vm also (win8x64 & win7x32), and when it had directory selection, I picked where mine is for underfoot on each system: C:\MQ2-UF
And that's where it put it.
So in other words, I have no idea, as I am not the one who installed it, and have no details.