Does the site need to be in root for SEO?

I am optimizing an ecommerce site that unfortunatelyt when you type in the .com name, goes to another directory other than the root directory and so the home page ends with.com/shop1 instead of .com. When I fgo to DMOZ or other areas to do the optimization, will I have problems optimizing since it is not in the root directory. Do I register this site's home page as www.xyz.com or www.xyz.com/shop1 as an example.?

Maybe you could Use a HTTP header redirect for the index page of your domain to point to the index page of your ecommerce directory...
i.e domain.com/index.php -> domain.com/ecommerce/index.php

Here's a small tutorial on How to Redirect ..