If you start Tomcat from the bin/ directory, the result is that you'll have <tomcat-home>/bin/WEB-INF/config/default/keypair.properties. Fun story, if the next time around, you start the same instance from a different location, the key won't be found.

Two issues, probably:

• the default value for magnolia.author.key.location is a relative path (WEB-INF/config/default/keypair.properties. Prefixing it with ${magnolia.home} would be a quick and simple solution.
• the value is used with new File(..path..); use one of the many methods we have lying around to make sure we use an absolute path, or that a relative path is relative to the webapp's root and not the current directory.