Not sure if this is relevant any more but shouldn't you create a new index.php file and add this to the root of your site to get a subfolder install working?
Its that long since I used this method I may be incorrect.
In this index.php file I'd put this:
* Front to the WordPress application. This file doesn't do anything, but loads
-blog-header.php which does and tells WordPress to load the theme.
* @package WordPress
* Tells WordPress to load the WordPress theme and output it.
* @var bool
/** Loads the WordPress Environment and Template */
Then in the wp
-config file I think you had to set up these two like so:
That used to be pretty much it.
I may be wrong so don't shout at me