There are a lot of topics on the subject saying that you cannot rewrite an incoming request to a different Application Pool in IIS 7 (one such post is https://serverfault.com/questions/220007/iis-7-5-multiple-application-pools-and-url-rewriting-403-18-forbidden). A redirect will work but the requirement for this project is we cannot allow the user to see or search engines to index the redirected Url.
So the question is: is there any other mechanism on the local server that allows you to intercept a request before IIS has had a chance to begin the request processing; somewhat like the old ISAPI filters used to do. A lot of articles suggest using some form of a Http Proxy or Software Load Balancer; both options are valid but can cause some overhead with physical and virtual resources. To recap, the main goal is that we're trying to get requests coming from www.domain.com/(.*) to be rewritten to www.domain.com/{currentversion}/{R:1} where the root Web Site and the versioned Web Application are isolated from each other.