Cormac,
I have that setup on my blog now, and have no major issues. The .htaccess in my wordpress folder is now as follows:

<IfModule mod_rewrite.c>
RewriteEngine On
RewriteBase /
RewriteCond %{HTTP_HOST} !^blog.moybella.net$ [NC]
RewriteRule ^(.*)$ http://blog.moybella.net/$1 [L,R=301]
RewriteCond %{REQUEST_FILENAME} !-f
RewriteCond %{REQUEST_FILENAME} !-d
RewriteRule . /index.php [L]
</IfModule>

In my vhost entry, blog.moybella.net is the ServerName and the ServerAlias is "www.blog.moybella.net blog.moybella.com www.blog.moybella.com"

Niall.