Internal server error

Assuming that www.example.com/site1 is the 1st site (in the root folder site1 folder), and www.example.com/site2 is the second site (in the root folder site2 folder. The easiest way (normally) to clone (or move) a site is to use the excellent WP-Clone plugin to backup and restore the ‘site1’ site to the root. But, you will have problems accessing site2 (which is a separate WP installation, as I understand), because the normal htaccess file used in WP sites will think site2 is part of site1.

So you would need to do some htaccess work to get www.example.com to point to the site1 folder, and www.example.com/site2 to point to the site2 folder. That might be a bit complex to do, though.

So, I’d recommend that you set up a multisite installation. The primary site would be in the www.example.com root folder, and then site2 would be www.example.com/site2 . This might be the best solution, IMHO.