The fpc.cfg file (located in binutils folder)
1) the compiler does not search for fpc.cfg in the binutils folder, but in the same folder as where the compiler binary is located
2) fpc.cfg is unused during a top level "make all". You have to pass all necessary options for cross-compiling to make via the command line parameter CROSSOPT="-XR/..."
Edit: originally I wrote OPT= above; replaced with CROSSOPT= since it is needed while building the cross target (AIX in this case) and not while building the "native" target (win32 in this case).
points to lib folder (inside the lib/crt0.o is located)
-XRc:\development\cross\lib\$fpctarget\*
-XRc:\development\cross\lib\$fpctarget
How to pass to ppcrossppc.exe the right -XR parameter?
By following the instructions at
http://wiki.freepascal.org/FPC_AIX_Port#Cross-compiling exactly instead of by using multiple -XR parameters (there can be only one sysroot directory, see the help of the compiler for what it does), and do not add extra things to the -XR parameter mentioned there (the compiler replaces "$fpctarget" with "powerpc-aix", so you are telling the compiler that your sysroot directory is c:\development\cross\lib\powerpc-aix, which does not exist).