The subdomain site is actually a website or a web application in itself.
You should have a seaparate web.config file for it inside your subdomain directory.
Also, i can help you more if you can share the error which you are getting.
I have a website say jayprakash.com .I have create a subdomain of that website say mg.jayprakash.com.
I have insert a default.aspx page.
but It is not working.
There is error such as runtime error.
How it run properly.
