I think that codeSubDirectories is used only when using C# and VB.NET in the same project. For ex. your website is in C# but in but you want to use also VB.NET code. This is valid only for websites though and not for web application projects.
using c# and vb in the same web project
But if for ex. WebsiteA is located in C:\inetpub\wwwroot\WebsiteA and you want the WebsiteB to have the location C:\inetpub\wwwroot\WebsiteA\WebsiteB then both WebsiteA and Website B should be configured as virtual directories in IIS.
If you were talking about sharing the same logic between applications, then you should wrap the whole logic in a class library and reference it to the projects.