Embeding 1.5 diff. dirs and default templates help

in the previous WP version I just copied what was on index.php and pasted it over to my own index.php which resides under domain.com/site.

now with this new version, I copied what was on index.php, but the comments don’t work, and when I copy the side bar to my side bar it stretches it a lot and makes the page 1200px.

my site’s structure is domain.com/site and WP is domain.com/site/news

any feedback would be helpful as Im lost on how these new themes work

thanks