I have the second situation. On my personal (reseller) domain i have a sub-folder called 'hosted' where each different website has a sub-folder. The domain name for that website is mapped to that folder. SE's really don't notice this. For PHP it makes no difference to what domain the folder is mapped, since it is all the same server. You can use absolute paths in your includes to locate files in a specific folder that has files which are the same for every website (e.g. '/my_common_folder/mysql.class.php').
pritaeas
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