In Lion the Finder folder is now invisible. To make it permanetely visible enter the following in the Terminal applicaiton window: chflags nohidden ~/Library and hit the Enter button - 10.7: Un-hide the User Library folder.
That being said once you move the original Domain.sites2 file into the new Users/Home/Library/Application Support/iWeb folder download and run this application to select the domain file to be opened with iWeb: iWeb Multi Domain. It makes a modification to the iWeb preference file each time it's run so the domain file you choose will be the one opened.
The application is the following script that Cyclosaurus offered to us in one of his posts that someone added the iWeb icon to. Or you can copy it below and make your own scrip applicaiton.
do shell script "/usr/bin/defaults write com.apple.iWeb iWebDefaultsDocumentPath -boolean no"
delay 1
tell application "iWeb" to activate
OT