Maintaining a Drupal site, or a collection of sites is much easier if everything is kept completely separate--Drupal core, contributed modules, and the site itself.
This is even more important if multiple sites are hosted on the same server. Drupal's own multi-site support can be a nightmare to maintain, believe me! (e.g. when you want to upgrade modules or core).
A must simpler and easily supported configuration is to keep everything separate and to use symbolic links to tie it all together. For example, I keep: