Just as a quick update to the post from 4 months ago, and probably as you noticed, the current version does indeed support blogs in a subdirectory structure.
@ralphleighton it looks like the issue you are experiencing might be because of the names you are giving your site or site title. There is a directory missing from those paths in those warnings related to your theme files:
[NOTE the double slashes].
In order for everything to work the Cloner automatically replaces values in the old site to values in the new. Please make sure that the name of the new site and the title of the new site are not identical with the names of directories in your theme paths or other critical keywords.
Also, if your existing site name or title that you are trying to clone, matches some of those things, you might also run into trouble.
Hopefully this helps you figure out where the collision is. Chances are it is related to the name of your theme - whatever is supposed to be between those two // in a row.