There's no reason it shouldn't be indexed, and most search engines now (i.e. google) use popularity to order thier lsitings. So, if the stuff on your second sit eis getting lots of hits, it may very well show up higher than the original site on the search engine's results. Whether or not the domain begins with "www." really isn't a factor.
I do search engine optimization as a major part of my job and you shouldn't have any problems (provided your site design isn't considered SPAM by the search engines.)
We use subdomains all the time for various clients. In fact, it's one of the best ways to get a directory listing in Yahoo for various sites under the same domain. Yahoo editors sometimes won't let a URL like http://www.mysite.com/mysubsite/ into the directory. But they'll let a URL like http://mysubsite.mysite.com in just fine (after you agree to their recurring annual fee of course ) Of course, that's the Yahoo directory (which is human-controlled.) For search engine spiders you should be just fine.
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