The filepath you are wanting is not in the 'program files' or indeed the main FS Folder.
When you go to your C drive, double click on the folder 'Documents and Settings' as opposed to 'Program Files.'
Then click the username that corresponds to yours, and in there should be folders such as 'contacts,' 'desktop,' 'favourites' etc. You will want the folder called 'Application Data.'
I think this may also be a 'hidden folder,' so you will need to enable the viewing of hidden folders.
Click 'Tools' at the top of the screen, and 'Folder Options.'
Click the 'View' tab, and then click 'Show hidden files an folders.'
Then, in the folder under your username, click 'Application Data,' and then navigate to the folder called 'Microsoft,' then 'FS9.' The file you are looking for is 'FS9.cfg.'
Hope that helps

Edit: I've just spent all that time typing that, but it would be just as easy to click the address bar at the top of your screen (in Windows Explorer), and type C:\Documents and Settings\<User>\Application Data\Microsoft\FS9\fs9.cfg where you replace <user> with the username of your account

. I think that should work.
Then just press ctrl+f inside that file, search 'TERRAIN_MAX_VERTEX_LEVEL' and change the value there to 21.
Oh, and AI stands for 'artificial intelligence,' it basically means that other computer controlled planes will appear in your sim. I recommend it, certainly gives a lot more realism if you plan on only flying offline
