It has to be a text file which contains paths to directories which contains you .net DLLs. The number of paths is limited to 64.
Would using the FILE-PATH statement in the CREATE command and a .xml file be a vaild alternative?
Yes. However, it is not recommended or tested to use multiple paths (although it may be possible). FILE-PATH needs the whole path the file name, while NetEvents.ini asked just for the directories paths.