What's the correct directory setup for Craft with Vanilla Forums?
Daryl,

I've setup a few sites with Craft and Vanilla Forums, I've always named the folder "Vanilla" to either "Community" or "Forum" so the url being "vanilla" isn't a problem. Also you should know you can do a javascript include into another craft template so the URL can be anything you want really. I've never had a .htaccess conflict though.

I've always run the forums under /forums or /community or something of the sort when not using the javascript iframe embed method at which point the url can be anything. I've never attempted using a sub-domain, just did not see the point.