Thanks for your replies.
I tried renaming the file to Nlog.dll.nlog.config but this didn't solve.
I also tried setting throwException="true" in the configuration file and then trying to catch it and output it the the System Output but it doesn't seem to be throwing an exception. Tried outputting the exception to a file just in case (by setting internalLogFile=="C:\...\file.txt" along with throwException="true") ...file remains empty.
For the record, I'm trying to output to Sentinel as seen in my config file below but this is not the problem because there are still no logs when I tried to output them to a file instead. This configuration file also works fine and writes to Sentinel in my non-RE control project.
Any more idea what this could be?