Sure. Make the virtual directory at the highest level necessary and you can browse down from there in the url just like you would expect. For example, D:\temp\virtualdir on the server (or some network drive, etc) could be hosted as a virtual directory and accessed from web browser like https://hostname/iis_virtual_directory_name/someinsidefolder/anotherfolder (assuming those folders exist inside the virtualdir location).
Again though, you will need to have directory browsing enabled if you're going to view the contents of a folder.
It's my understanding that this is a security measure put in place so local files cannot be opened via a link. You'll probably have to host the file online somewhere as mentioned above.