What would be the best approach for SEO where you have a domain (premium .net framework model) hosted on say server A, and you create another site (free PHP/wordpress model) to drive traffic to it. Would you host the latter as a subfolder or subdomain? Also, where would you choose to host the subdomain or subfolder, on server A or elsewhere?
Subfolder is definitely the way to go. Here is why:
With subfolder, you share SEO juice with the root level domain.
If you do sub-domain, it's like a whole new domain (in the eyes of Google) and will not get any existing SEO benefit.