In the next version of osCMax would it be possible to modify the install procedure to ask, "Do you want the store installed at the root directory or as /catalog?"
I don't think this would be possible without a major rewrite of the installer, since the installer does not upload the php files to the server and is dependent upon where you upload the files in the first place. If you upload the files to /catalog there is no way for the installer to then move them to the site root. We will be updating the installer to match the core osCommerce RC1 install process though (although I am not too familiar with it right now).
This one has always puzzled me. I am not even sure why anyone ever asks the question in the first place, since you can install osCMax in whatever directory you want, and it is fully in the users control to upload the files to wherever they want on their server.
It just seems logical to me that if I want osCMax in the site root, instead of uploading the files to a /catalog subdirectory, I would upload them to the darned site root. At some point we have to expect that the person installing does have to engage their brain and actually think about what they are doing. It doesn't get any more obvious than that. But hey, I am also a genius, so things like that are obvious to me... 
Maybe adding some text to the installer step 1:Hey osCMax user! Did you think about where you want to install your osCMax shop? Do you want it in the site root? If so, did you upload your files to the site root?
One surefire way of idiot proofing anything is to make it too complicated for idiots to use
(send your hate mail to blackhole@oscmax.com)*
*Disclaimer: For anyone reading this who lacks sense of humor, the previous statement is what we like to call a 'joke' and is to be taken as humorous.
Now back to the original topic of this thread:
I put a file .htaccess in the directory above /catalog with the code you supplied. It did not work. I got a error about forbidden access.
If you are getting a forbidden error, either your path is incorrect or your host does not allow DirectoryIndex overrides through .htaccess. You should check your error logs for the path of the 404 error and adjust your .htaccess file accordingly. Most likely, you would have to make the path /subdomaindir/catalog/index.php.
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