I just downloaded CGE 7.0 alpha for Windows, unzipped it, created a new directory called “CGE7” and copied the new files there. I already had a directory called “CGE” which contained version 6.4
My question is, will these two versions conflict with each other?
I ask because when I first run version 7 of the editor, it did not ask me to change or verify any settings, but version 6.4 did (the first time).
A new FPS project compiled and ran without issues. Is version 7 of the editor better at working out the right settings or is it using the 6.4 settings somehow?
No, they won’t. However, make sure that you use appropriate packages in Lazarus or specify proper $PATH. E.g. if build-tool from both of those on $PATH the results of command-line compilation and/or shell scripts execution may get confused.
I’ve had 3 or 4 versions of CGE on my machine and accidentally once used an obsolete Castle Editor, that costed me around half an hour documenting why the bug wasn’t fixed, while it was fixed long ago 
So overall, it might be a good idea to have only one version - just to spare yourself of confusion or other confusions that may arise from non proper update of the config files or environment variables. Using multiple versions simultaneously can be useful only in some very specific cases (like when pinpointing a specific commit that caused a regression, or working on multiple projects some of which cannot be upgraded easily).
Yes, 7.0 and 6.5 (Editor hasn’t yet existed in 6.4 if I remember correctly) - in as many versions as possible will share the same config files (that also means $PATH to build-tool, so avoid confusion noted above). It’s usually located in C:\Users\YourUserName\AppData\Local\castle-editor\castle-editor.conf. You may delete this file to make sure the configuration is reset. Or just use “Preferences” button in Castle Editor - there aren’t many settings
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Yes, you’re right, the older version is 6.5 not 6.4 (I just checked the zip file name). I’m not sure why I had 6.4 in my head.
I planned to have two versions on a temporary basis while 7.0 is at an alpha stage, in case I encounter any serious bugs.