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How will the search engines view this redirect, and is there a better way to achieve the same result? I know there's a lot on WW about redirects, so if someone can point me the right direction, that might be all I need.
However, if you want it to be "seemless" - ie, the url only has:
foo.domain.com instead of domain.com/foo
you should consider using a URL Rewriting tool. That essentially does what your redirect does, without actually forcing a redirect. Ie, the request comes in as
ASP sees it as www.domain.com/foo
Try ISAPIRewrite, etc. THere are some free tools, and some free code to write your own regexps to do this if you want as well. just google to "url rewrite iis".