How to go about setting up multisite

Ok, so here’s what I’m facing. I set up my main site (let’s call it http://www.MainSite.com) and over the last two months have altered code here and there and added plugins to make it exactly what I want. A few days ago, I installed a new wordpress site into a subdirectory (www.MainSite.com/UserReviewSite) Everything is going well, except that I’m using S2Member to restrict access to certain content and I would like to do the same with the subdirectory. Apparently, I’ll need to set up networking but I’m not sure the best way to do it. On the instruction page, it looks as if both sites have to be subdirectories?

Also, deactivating plugins would render my site unuseable. Is it really necessary to deactivate them before doing the update?