I would definitely have the blog in the root directory. The more levels into the domain you put the blog, the worse it is for SEO - or so I've been told, even though I don't know much about SEO myself. Like it's already been suggested, use the WP feature that allows you a static home page if that's what you want. But keep the installation in the root directory.
I have 2 blogs that I started under a /blog directory thinking that "at some point in the future" I might want to have something different in the root directory. I regret having done this, more often than not you end up not needing the root folder for anything else and it just goes to waste - unless you already know that you do want the root folder for something else. Don't "save it" for a possible future use if you bought a domain for a blog.
My newer blogs are all in the root folder. Much, much better.
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