Resolution
To configure a site domain.net to be published via XCOPY, please:
1. Share C:\Inetpub\vhosts\domain.net folder with domainname share name.
2. On XCOPY publishing settings tab in Sitebuilder, please specify:
- Working Directory as \domainname\httpdocs
- Web site URL as http://domain.net
3. Click on Verify Location option -- it must show Dymanic status.