(mfaktc has the same problem.)
I don't know how other people upgrade their mfakto, but what I usually do on the terminal is
wget the latest binary from James's website
tar xf the file in-place
... and there goes the problem. tar xf overwrites files, which is good in the case of mfakto itself and the kernel files, but bad in the case of my mfakto.ini. Luckily I remember what I have changed.
Perhaps the mfakto.ini file in the tarball can be renamed to mfakto.ini.example, and the mfakto binary itself has some logic for copying the example file to mfakto.ini if the ini file doesn't exist?