I'm new to dns hosting and I have recently setup google apps for the 'mail.' cname record.
How can I use it to display files on the www URL? ie: 'www.' cname.
Or is it not possible to upload files using dns hosting only?
I also have hosting elsewhere and wanted to know if I could forward the www cname to a subdirectory on that server, but not displaying the subdirectory URL publicly, rather the address bar constantly remains as the dns hosted (original) domain?
No, you won't be able to host files at your DNS server. It's only meant to point browsers (or whatever else) to a server where the files are hosted.
If you want www.example.com to point to www.domain.com/folder/path then you could use something like ZoneEdit's webfoward. It allows you to point any CNAME at a web URL and cloak it so users don't see it. But just a word of warning, I've tried this before and it hasn't always worked. Another option is to run a script (like PHP) that includes the files from the other address, although this could get complicated depending on how many files you're needing to redirect to.