It will need access to the main forum directory... not sure how the feature he is talking about works... the main core phpbb files also load files in the includes directory and others... Do those need to be 'open' as well...
Not sure how your hoster is... but can you define the directory where a subdomain resides? For example on 1and1.com I can have a subdomain reside in a directory inside another domain and with that all the files are accessible.
In the end it might be easier to move the forum than jump thru a bunch of hoops