[eluser]Michael Wales[/eluser]
You wouldn't have the /system/ folder.
I use the exact same directory structure - so I can run multiple versions of CI and upgrade/downgrade as I know my applications are backwards compatible. I have the following structure:
/ci_1.6.3
/ci_1.6.2
/app_1
/app_2
Each of the applications has their own index.php (the one you would get out of the root directory within the CodeIgniter download). Withing that directory you just define the $system_folder directory pointing to each version of CodeIgniter.
For instance, app_1 might have a $system_folder of ../ci_1.6.3 while app_2 has ../ci_1.6.2