Long ago, before custom domain publishing became a Blogger option, it was normal to publish a blog into a website subfolder. FTP Publishing let anybody publish a blog as "www.mywebsite.com/blog".
But FTP Publishing ended, shortly after custom domain publishing replaced it. And now, publishing to a subfolder is not an option.
With custom domain publishing, you can still publish a Blogger blog as part of a website - you simply publish to a domain host, not a subfolder.
- Add the DNS address for "blog.mywebsite.com", to the domain.
- Publish the blog to "blog.mywebsite.com".
The domain host is sometimes referred to as a subdomain - though generally, you will use a virtual host in the domain. It may be possible to simulate the URL of "www.mywebsite.com/blog", using a custom redirect.
With the blog published to the domain, you have a domain cluster. You then add the blog as part of the website.
With the blog part of the website, you continue to publish the blog, with informative, interesting, and unique content. The key phrase here is "continue to publish".
Custom domain publishing - while slightly more complicated than FTP publishing setup - provides a more stable experience, for your readers. And isn't that why you setup a blog, in the first place - for your readers?