Most systems have a global config, project config and personal config.

But I do like the directory style to keep context low. Cursor did it best with actual glob filters in the front matter that tell the LLM "only read this if the file you're processing ends with *.php"

They are not doing this mechanically (read file, compare to globs to add more context), they try to rely on the model to notice and do another read. It has been unreliable. I have had better results by adding instructions like...

"If the user asks about X, Read `./path/to/inst.md`"

Still lots of DX to do in this space