Certainly on this (relatively) clean install, the log files are being stored in the directory specified there.

If I change it to C:\Program Files\mIRC\temp, then:

Code:
//echo -a $chan(#).logfile

-> C:\Program Files\mIRC\temp\#test2.Private.1.log


So maybe you have some script that's getting in between mIRC and its own settings...(?)