Well whatever you do I would backup and then keep messing with it. If all else fails you have a backup. If you are not sure how to do that ask your website host to do one right before you try moving it.
If you are just copying the root web directory and copying it to /blog that will not work. You need the mysql file and it needs to be pointed to from the WPMU in /blog.
You might try installing a new WPMU to /blog then pointing it to the mysql that you have.
But backup first. Backup the mysql. Carefully.