Right now, we are using both config.yaml and localsettings.js to configure Parsoid. The former is used by service-runner, and the latter is used by Parsoid. Once we resolve T141370, we should be able to use config.yaml for configuring the production Parsoid setup.
On the other hand, with localsettings.js, we control updates and deploys in Parsoid land without needing to go through Puppet and ops review and merge. So, that needs to be factored in as well.