You've got the 'mysite' part in both the settings spec and the PythonPath. Given what you have, Python will be looking for:
C:/Program Files/Apache2.2/htdocs/mysite/mysite/settings.py
Then, when that is not found, everyplace else in sys.path + mysite/settings.py
If you are going to be including 'mysite' in your imports (and settings spec), then don't include it in the PythonPath. Or, drop if from your imports (and settings spec). (Or, include both the mysite directory and its parent directory in your PythonPath, then you can mix inclusion of 'mysite' in your imports with leaving it out willy-nilly, but that is rather messy. Better to pick one alternative and stick with it.)
Also, I'll repeat something I posted in another thread earlier today:
BTW your earlier spec for the PythonPath directive you are using showed you are putting your project code under the default Apache document root htdocs -- that is a bad idea as it may make your source code (including sensitive stuff like database password in settings.py) easily accessible from the web, depending on exactly how you have Apache configured. Your Django project source code does not need to be under Apache's document root, it simply needs to be found via the PythonPath you specify in your Apache Location block for your Django project.
Karen