Setup and deployment project does not have any support to create custom website or App pool under IIS. But if you really need that there are workarounds. There is .net API(Supports IIS7) wihch allows you to create Website or App pool using C#.
Programically creating Website in IIS
create a console / WinForm application which creats the website and
app pool(You can hardcode or let the users type in the site name
during the run time).
Create a setup project which will be used to execute the console
application you have created. You will have to add Installer
Class to your project. Within the installer class you will need
to execute the console application.
Sample Code
public override void Install(IDictionary stateSaver)
{
base.Install(stateSaver);
Process process = new Process();
ProcessStartInfo startInfo = new ProcessStartInfo();
process.StartInfo = startInfo;
startInfo.UseShellExecute = false;
startInfo.RedirectStandardError = true;
startInfo.FileName = "ConsoleApp.exe";
process.Start();
}
So when you install this MSI in user's machine it will create website and app pool under IIS.