[eluser]Michael Wales[/eluser]
You should use relative paths for the system_folder and application_folder variables.
I pretty much do exactly the same as you:
D:\xampp\htdocs\system
D:\xampp\htdocs\[folder-for-site]\[contents of application folder]
D:\xampp\htdocs\[folder-for-site]\index.php
In index.php:
Code:
$system_folder = '../system';
$application_folder = './';