Recently, the PC version of Sonic the Hedgehog 4: Episode 1 received a small patch to fix certain fix, but unfortunately it seems like a small number of people - ourselves included - have noticed that after the update has been installed, their settings were all gone and that their save file for the game have mysteriously vanished, and of course, SEGA hasn't manged to solve this issue yet.
Now, Sonic Retro have solved this issue, but first let me explain that this last update actually created a second executable file: one for Windows XP and one for Windows Vista/7, which isn't really unusual for a lot of games these days. To restore settings, you'll need to run the settings application included with the game. As for the save file, it's still there with all your hard work. It just needs a little renaming.