Suppose you had 2 computers. one where you wrote & compiled your application. and a second one you used for testing
A copy step that put the data in SpecialFolder.ApplicationData would only do anything useful WHEN you compiled the application - they run when the app is COMPILED (this includes using the RUN button to debug)
So what you might do is use a copy step to COPY the file into Resources - and then when the application is executed check and see if it already exists in SpecialFolder.ApplicationData and, if not, copy it from Resources inside your app to SpecialFolder.ApplicationData