If you want to install wordpress on your domain folder you will need to make the URL when installing to be yourdomain.com/ and not yourdomain.com/wordpress.
As for the DNS not operational, if the domain isn't registered by us, you will need to set the needed freehostia NS servers from your Domain Manager. They can be found at My Domains -> Hosted Domains.
Thanks bro. I got the Name server working after a few "loud" conversations with the domain manager.
It wont let me install to XXXXXXXXX.com