I wonder if there is a misunderstanding on the interpretation of the use of virtual directories to deploy a site, and how IIS is configured to display it.
I know that if I'm going to have child portals under a site, I try to have the DNS * wildcard setting use the parent portal so that I use http://alias.site.com rather than http://www.site.com/alias (this is the child portal)
I was just playing around locally on my virtual install http://192.168.1.101/Nov07 and setup a child portal with this in the setup http://192.168.1.101/Nov07/hello and it automatically displays as http://192.168.1.101/Nov07/Default.aspx?alias=192.168.1.101/Nov07/hello because in theory I didn't think you could run a domain.com/folder/folder instance. I could be wrong, but I think sometimes the offering of the child portal could cause people confusion that isn't necessarily DNN related but how IIS is normally configured an in a hosted environment I think companies tend to keep things pretty standard.
However, when i setup this domain - http://yada.192.168.1.101/nov07 as a parent portal on a virtual directory, because I have no setting in the DNS entry (and why would I - it's local) it won't display becuase it's not created a folder in IIS, like the child portal setup has done, with a default.aspx file in the hello/ folder that is created when you have child portal instance.
Have you tried to put up the full path including the directory, and see if it's picked up. I don't do my installs that way, but I know that DNN does and can handle child portals well and if you request to have a Wildcard DNS entry with your domain, then you can use the efficient parent portal setting and it will work without problem every time.
I hope this puts another approach this area which is one of those things that is very handy.
Nina Meiers
Nina Meiers My Little Website
If it's on DNN, I fix, build, deploy, support,skin, host, design, consult, implement, integrate and done since 2003.
Who am I? Just a city chic, having a crack at organic berry farming.. and creating awesome websites.