you gotta install MU in your site's root if you want that.
Follow the readme and also this: http://mu.wordpress.org/forums/topic.php?id=4624
and be careful with the existing site. :)
Also, if MU is designed to be run from the main publicly available directory. AKA your root directory, public html, htdocs directory, etc. If you have a website there, you CAN integrate that to run as your main site in MU. You need to get a little creative with templates, but that shouldn't be a big deal.
If you want to use subdomains, it especially need to be in the root. Installing it in a subdirectory, and expecting it to be in the root by the looks of the url isn't feasible. Also, your links will look like either "username.domain.tld/subdir/", or "domain.tld/subdir/username/" as a base. If you use a subdomain as the install point of MU, it would look like "username.sub.domain.tld" or "sub.domain.tld/username/", and even worse with "username.sub.domain.tld/subdir/" or "sub.domain.tld/subdir/username/" if you installed it in a subdirectory as well.
To put it short, domains are cheap. Get another domain if you have to, and make sure you don't add that domain as an "add-on" domain. It needs to have it's own virtual host in apache. Then again, if you've come this far add-on domains shouldn't be an option since you most likely won't be on shared hosting, right?