File structure for running multiple blogs

I have been successfully running http://www.thewriteelizabeth.com since early 2009. I use cPanelX with SQL database structure. I am now trying to set up a second blog with a different URL.

I understand that the file structure for running two blogs from one database should simply be public_html/blog1 and public_html/blog2 with the WordPress files located within each blog’s files.

However, the WordPress files for blog1 are outside its folder and each time I try to move the files into the folder for blog1, my site “breaks.”

What can I do to configure my folder structure in cPanelX to allow for the blog1 and blog2 to each have its own WordPress folders? Do I need to re-install the WordPress files for blog1? And then another copy for blog2?

Alternatively, I could create two SQL databases for each blog, but then what would the file structure be?

Thank you,

Elizabeth