First a comment - 6 million downloads would suggest that lots of people have not had the difficulties you are encountering trying to run a modern year 2011 asp.net CMS on an aging 10 year old operating system with more limitations than features.

As you indicated in your original post you WERE ABLE to get dnn running in this old xp system - and to create accounts and view the running site.
Just for sh$ts and giggles - I did an install of DNN on an old xp box that hadnt even been booted up for about 6 months - the install - including loading ms sql 2008 express and finding an xp disc to configure IIS took no more than half an hour.

Secondly, based on this quick test - loading anything into xp brings with it all of xp's limitations.

working with dnn in the ROOT you can access DNN using the following parameters

http://localhost/
http://anydomain.com/

working with ddn in a virtual folder - you can access DNN using the following parameters

http://localhost/virtualfoldername/
http://anydomain.com/virtualfoldername/

if you then try to create a parent portal in DNN first in the root u can access it using

http://anyseconddomain.com/

if you then try to create a parent portal in DNN in a virtual folder u can access it using

http://anyseconddomain.com/virtualfoldername/

it cannot however be easily accessed by just using http//anyseconddmain.com/  since there is no way to perform this mapping directly in xp without setting up a redirector in the root of some sort to remap the calls to http://anyseconddomain.com/virtualfoldername/  --  and since dnn is NOT installed in the root - this is not something dnn could do - you would need to manually setup a redirector of your own.

Thirdly, I would suggest that maybe instead of trying to run a multiple portal DNN configuration on a version of IIS that was never meant to host multiples of anything - that instead you consider using a platform more suited to the task.  Windows 2003 server, Windows 2008 server, Windows Vista, Windows 7.

Fourthly as to the misguided comments regarding seeing not advantages over coding yourself ... what dnn brings is a full application framework eco system that provides out of the box features that represent somewhere in the millions of man hours of coding and development.   Do you have the spare million hours to code the same features?

But regardless, it is what it is - an open source community developed application framework that many hundreds of thousands of websites utilize each day to allow is developers to focus on the content of their sites without the need to get bogged down in coding.

I would however suggest that whether you use DNN or code yourself on a XP box while trying to work inside a virtual directory - you will be faced with the same limitations.

If however, for what ever reasons you are stuck back on a xp platform and want to run multiple portals on the same server - that you should at LEAST make dnn the only framework on the IIS server - and run it hosted in the website ROOT - not in a virtualfolder.  This will at least allow DNN to run to its full capacity as a multiple portal hosting system.

Oh and just a heads up - if you choose to move on from DNN - thats your choice - you will find the same limitations in XP regardless of where you go - AND if you chose to suggest that DNN is not right for others - that would at the least be a misrepresentation based on your current 10 year old operating system's limitations.

But you know like any community where help and support is given for free - your choice to move on would not make anyone loose sleep - but while you are here people like myself and others will try to offer suggestions to help you move forward ... and you have my suggestions in this message.

Cheers

Westa