The priority in FuelPHP is: - module config - app config - packages config - core config
When you load a configuration file, it depends on your current context what is loaded. For example, module configs are only loaded if you are in a controller AND in a module context (i.e. you requested a module controller via the URI, or via an HMVC call).
Configuration files are merged, so if all four locations have a config file with the same name, all four will be loaded, and merged in order of priority.
As a Kohana module is more like a Fuel package, I'd say the order is the same.
The commandline shortcut ('oil') is a *nix script, that obviously doesn't work on Windows.
So you'll have to go to the folder in which you have installed FuelPHP (the root of that installation in which you find the oil file), and start it with "php oil" (if php.exe is in your search path). You'll find this in the documentation.
If php.exe is not in the path, you may have to put the full path in, like "C:\MAMP installation\bin\php.exe" or where-ever it is installed.
I'm a trainee in the company. I don't really know if the company uses the standard installation. I just know that folders' hierarchy is not the same as defined in oil.php and public/index.php.