Do a clean reinstall and download a fresh Firefox copy from http://www.mozilla.com/firefox/all.html and save the file to the desktop.

Uninstall your current Firefox version and remove the Firefox program folder before installing that copy of the Firefox installer.
Don't remove personal data when uninstalling.

It is important to delete the Firefox program folder to remove all the files and make sure that there are no problems with files that were leftover after uninstalling.

You can skip the step to create a new profile, that is not necessary for this issue.

See http://kb.mozillazine.org/Standard_diagnostic_-_Firefox#Clean_reinstall

Here’s a step-by-step instruction to get rid of the couldn't read application.ini problem on Firefox:

1. Uninstall Firefox by going into Control Panel > Add & Remove Program.

2. Reboot your computer.

3. Go to My Computer (C drive) > Programs > Mozilla Firefox

Yes. This is a strange part I found for “application.ini” file. It’s un-deletable, unmovable, un-uninstallable. I checked for viruses by scanning with 2 different software. No virus was found. So here’s what I came up as a solution:

4. Open the Program > Mozilla Firefox folder.

Do you have the source of error, application.ini in the folder?

5. Click on Back icon until you see the Mozilla Firefox folder. Rename the folder with anything you like, such as “useless junk” etc. except “Firefox” or “Mozilla”.

I named the file as “unused”.

6. Go to Firefox website and install the new Firefox.

Done!

If this doesn’t work, let me know! :-)

Thanks for the info.

Before I follow your recommended approach, I wonder if there is a way that I can somehow save my firefox bookmarks (folders) so as to (Import) into the new firefox when reinstalled?

Obviously, I can't use Bookmark Manager and it's Export feature because I can't open firefox. I don't have my bookmarks (folders) saved.

Situation doesn't look good, does it!

Use MozBackup:

http://mozbackup.jasnapaka.com/