First, where the actual DLLs are installed is not that important besides the permissions issues you will run into.
If you want to change the Install location to the default wwwroot location you would need to use the "[WindowsVolume]" predefined folder with a subfolder path of inetpub/wwwroot/[ServiceName] for the install location.
You will also need to use the IIS configuration components under the "Configure the Target System" of the IS Project to set up the WebService in IIS during installation.
