2 Websites, 2 Domains, Same codebase

[eluser]icomefromthenet[/eluser]
I'm in the same boat now, the two easiest ways I found to configure apache for multiple named virtual hosts, (hard to maintain) with a wild card in the ServerAlias, like '*.localhost.com'or use ModAlias to map subdomain to directories. If you need alot of flexibiliy try mod-rewrite.

About the paths, you would need to set both the system and application paths in all index.php in the setup above should be set to (../../application),(../../system)