My approach has been to have multiple config files. I put all environment agnostic stuff (i.e. doesn’t matter if dev, staging, or production) in the web.config file. Anything that is specific to the environment (i.e. database connection info, logging, debug settings, etc.) I put into a local.config file specific to the environment. You can then include the local.config settings in the web.config using configSource (http://weblogs.asp.net/fmarguerie/archive/2007/04/26/using-configsource-to-split-configuration-files.aspx)
Web.config can then be checked into source control. Don’t check in the local.config files – that forces you to deploy the correct one in your deploy scripts.