If you only set the Proxy Executable to point to privoxy.exe then it won't work because Privoxy will complain about being unable to find its settings. This is because it's looking for its config file in the Vidalia directory. You can fix this by adding a Command Line Argument consisting of the full path to the config file, eg.
"C:\\Program Files\\Vidalia Bundle\\Privoxy\\config.txt"However, Privoxy still won't start, because the config file will, by default, look for its "child" config files in the wrong place. So, the final thing to change is to edit Privoxy's config.txt to set the confdir to the full path of Privoxy, eg.
confdir C:\Program Files\Vidalia Bundle\PrivoxyAll of this fiddling could be avoided if Vidalia understood shortcut files. The shortcut would let you set the directory that Privoxy would be run from, and would also let you start Privoxy minimised.
Note that Vidalia and Privoxy are both multi-platform packages, but my instructions are for Windows only.