I guess no phone call is necessary then eh?  From what I have experienced in my short 2 weeks, the behavior that you are describing in on the mark.  The problem with 1and1 is that in the root directory is where they keep the asp.net directory which is also why the Code Behind (Bin) needs to be in the root.  Because of this behavior, you have to have your website start at the root and work it's way deeper, thus giving you the /dotnetnuke in the address bar.  Two things you could try now that you are having success.  Call and ask 1and1 to make your root directory an application directory (I doubt they would) and install DNN straight into the root.   You could also see what would happen if you copied the asp.net folder into the dotnetnuke folder and then pointed your domain straight at it although I REALLY doubt that would work.  Perhaps some veteran will know and understand more how to overcome this....

One thought I had was moving away from 1and1.  I like their pricing but the sites seem to load slow, the email is less than consistent, and I'm tired of fighting....   Please let me know how this resolves!