The easiest solution is by far creating a virtual directory.
You can go another route which is to install/copy key files to the root directory, and leave the other files in the blog directory.
For this 2nd scenario, you would place the following files/folders to the root directory:
The rest of the files and folders would remain in the 'blog' subfolder.
Also, in the web.config file, there's this setting:
<add key="BlogEngine.VirtualPath" value="~/"/>
You would want to change that to:
<add key="BlogEngine.VirtualPath" value="~/blog/"/>
(or whatever the name of your blog folder is).
I'm just listing these steps while looking at the contents of the default BE folder. I may have missed something, but that should mostly be everything.