How do you configure IIS 7 to use a subdirectory as the default document?

You need to configure HTTP Redirection on the web site. Make sure that the HTTP Redirection role service of the Web Server role is installed. Once that's done you can select your site in IIS Manager and double click the HTTP Redirect icon in the IIS area of the features view to configure redirection. (Sounds complicated, huh) - ;)

Just set

  <defaultDocument enabled="true">
      <clear />
      <add value="Candidate/Login.aspx" />

in Web.config file and put all files not with in a subfolder so that user can type Url only instead of Url/subfolder....

Here clear is the main thing to be done which will clear all other default docs with in IIS ...