Subdomain unsucessfull

A little history first as I've been working on this solution for over two weeks and I've had no success with DASP and Subdomains.

We have the A Record pointing to the unique ip at DASP.

In the index page located in the root site we have the advised redirect:
If InStr( UCase(Request.ServerVariables("SERVER_NAME")), UCase("parts.sec-ep.com") ) > 0 Then
Response.Redirect("~/parts/")
End If

Now this works fine, however the final Url is sloppy and shows http://parts.sec-ep.com/parts/ What I need is the subfolder to be dropped from the url so I was advise that I would need to implement UrlRewrite.

Since I'm using .NET4 and I'm on IIS7 Server I added a UrlRewrite rule. Never could find a real good example of a subdomain rule but I eventually figured it out, however I receive an error as listed.
Outbound rewrite rules cannot be applied when the content of the HTTP response is encoded ("gzip").

After searching and trying various work arounds such as moving compression module after URL Rewrite which as advised here: http://stackoverflow.com/questions/3713804/url-rewrite-outbound-rules-iis7

So now I tried a third part solution. So I began working with UrlRewriter.net such as ScottGu's blog shows: http://weblogs.asp.net/scottgu/archive/2007/02/26/tip-trick-url-rewriting-with-asp-net.aspx

I've tried everything and what seemed the closest resolution, I receive the following error: 'http:/parts.sec-ep.com/' is not a valid virtual path. Every other solution does not remove the /parts/ section of the Url leaving me to believe that the technology is still new and doesn't work or one of the many settings is incorrect - which one, no one can say. I totally understand there are many way's to skin a cat - but I just want one at this time as nothing is working. My client is now asking to move the site to another provider which will be a major pain but I have not other ideas.