Hi my query is:
The list of folders for network drives or local will be part of configuration XML. User should just modify the XML and AutoCAD would set the folders in options during startup. The XML would contain data for different profiles
Very possible - its what we use. There is some substantial work involved to get it to work right, so I would suggest planning everything out first. Code is the end product, not the starting point.
I wish more 'standards' settings were stored externally in XML schema (able to be specified per-Profile), similar to the way Civil 3D targets one of multiple external pipes (more accurately parts) catalog, etc..
Another Civil 3D example would be when data referencing an Alignment... The referencing drawing's available styles control the display of the alignment, rather than the host drawing, as is the case when XREFing same.
Sorry for all of the Civil 3D references; it's what I work with mostly.
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