When you created your "subdomain" did you also create an DNS entry for it too?
Looks like now you don't have any files in there.
What happens when you upload the Blog engine files there?
"Site doesn't see css and js files"
Did you made sure you uploaded everything?
I notice when FTPing files one by one sometimes some files don't get transfer correctly.
Best solution is the zip the BlogEngine.Net folder first locally then just FTP that one zip folder to your server.
Then once on server unzip it there.
Then move all files to your wwwroot directory.
That should work and nothing else is required.
Now if you install it in a sub Directory
Then you might have to configure that to make it work.
Have a virtual directory and point it to the folder where BE is located.
Then your main site web.config might make your /blog web.config have some duplicate settings and those you have to delete.
Best way to install is subdomain.
Don't know of any reasons why CSS and JS files are not showing up other than them not being ftp or loaded on the server to begin with.
Let me know if this works.
Have a great day!