A subdomain is a DNS issue. It needs to be resolved at that level.
Here is how one would create a domain, and then a subdomain.
DNS - this service is installed as a Network service. This will allow IP addresses to be resolve to the corresponding host name. First, create the top domain structure in DNS Manager by choosing DNS and adding the server. You will enter the IP address of the DNS server here. Next, select the server and choose New Zone from the DNS menu, then choose primary. Enter the zone name and click finish. Create the subdomain by choosing New Zone and following the same steps as before. You can now begin creating the Alias (A) files for the network clients.
To read the full context of the above excerpt, go here. It's down towards the bottom by the IIS stuff.
http://www.certsites.com/print/ms/nte.htm
Remove any spaces from the pasted url.
HTH
nikki