[eluser]theprodigy[/eluser]
you can place your application folder wherever you like as long as you update index.php to the correct path.
Some people stick with the default layout.
Some pull application outside of system.
I tend to pull application out of system (so they are sibling directories), and then pull the entire directory structure outside of webroot, leaving only index.php and asset folders (css, js, images) inside of web root, then update index.php to point to the application and system directories.
As long as index.php knows where the folders are at, you should be able to put them wherever you like.
