Use a custom post URL that is outside the blog root directory

Yes, it is possible.

You have two options. First, change the folder where your domain goes.

If I get it correctly, now, your domain goes to the root folder. You have to change it, and make it goes to the blog folder.

The second option, is move all files that are inside blog folder to the root folder.

When you did any of these option, you won’t be able to access to your wordpress. You’ll have to access to it’s database, and change the base_url from it.

Here it is explained.
http://codex.wordpress.org/Changing_The_Site_URL

Hope it helps!

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