Basically, you don't need to move anything.  Leave it all where it is.  I have set up temp dnn installs in subdirectories when transferring a website to a dnn platform.  All you should need to do is to add the appropriate portal alias in Dotnetnuke prior to changing the web host settings to point the domain name to the current dnn directory as the "root".  Simple as that.  For entering a new portal alias, go to Admin->Site Settings page and under Advanced->Portal Alias you can add a new portal alias.  The new alias you enter is www.domain.com.  I think you can also access portal alias from the Host->Portals page, but not sure, some of that has changed in the various upgrades this past year.  Once you have IIS pointing to the dnn directory as the domain root, then you can delete the old portal alias or just leave there, either way it won't hurt anything.

For pointing the domain to the subdirectory, in IIS it would simply be changing the path for the domain name to point to the dnn directory instead of the root folder. 

Super easy, done it lots of times.  No need to move any files.  No need to do anything with web.config or backing up and restoring.  Just change those two entries and you're all set.

JOHN GIESY
DotNetNuke Hosting Expert

DotNetNuke 7 Hosting $70 /year
DNN4Less.com Team DotNetNuke