Yes you can use shared hosting and use slave site into a subdirectory.
You can NOT use the DNS redirection because once the URL will be redirected, JMS will not know which was the original URL.
if your website is present in a subdirectory, you don't need to setup the DNS.
The only case where your DNS is required is when you are using a subdomain or a domain.
I suggest that you have a look to the presentation that we did at several joomla day and also the tutorial video 0.b.
www.jms2win.com/en/documentation/doc_det...-day-strasbourg-2012
www.jms2win.com/en/tutorial#jms12x-0b
If you are doing the setup manually (not cPanel or Plesk), you have to setup the DNS server to point on your server (the IP address).
And on your server, you have to setup apache to recognize the domain or subdomain with an associated document root.
The document root is the place where you have deployed your slave site in JMS.
(The field deploy directory in JMS)
So yes you can do that.
All the cases are possible (domain, subdomain and subdirectory).