Moving a site to a subdirectory

[eluser]sekiuchan[/eluser]
My folder structure is like this (I didn't make it this way, taking over for another dev)...

/dev
/application
/controllers
/models
/views
..etc
/system
/application
/controllers
/models
/views
..etc
index.php

If I edit that index.php file, outside of both of the directories, it will effect them both, right? So how do I tell it that if the url has the segment /dev in it to treat it as a directory and whatever is after /dev is the controller, using a route[]?

Can I do an if statement in index.php that checks for the url segment /dev and if it is there sets the system_path and application folder to /dev/system and /dev/application?