Hi!
Currently, there are no more detailed references for the manifest.xml file than what is found in the Packaging Guide. Feel free to continue posting any specific questions you may have here, and we'll work on updating the guide appropriately.
The Web Deployment Tool (which is the component that uses the manifest.xml file to install the application) does not have a provider which will allow the application package to create virtual directories.
The iisapp provider (which is a required provider for all applications) will create an application and a virtual directory as part of the application installation. Only one of these directives can be specified per application package.
Thanks!
-Jake