I have 2 websites on the same server in IIS7. These websites are required to be separate (Application Pools will not suffice). I have a single domain and am not able to create subdomains. Because of this I am only able to access Website A. Can I point a subdirectory in Website A to Website B?
Yes. Just create a new application with the desired sub path under the main site. The new application can be run under a separate application pool.
Note that there may be fixes you need to make to the second application, because it is running with a sub path. If it generates any absolute URLs or server-relative URLs, they must be generated with that in mind, or things may end up trying to go to the main application.
We always develop all our applications at a sub path and with a nonstandard port to make sure the code works in these scenarios.