AOLserver's virtual hosting/reverse proxy solution, nsvhr, doesn't work well out of the box. So if you want to use it, you need to patch it, and the patches are patches to the source. Nsvhr runs only in the master, so in fact, to use nsvhr, you definitely need the master to be running from a source install.
There are other virtual hosting/reverse proxy technologies, including Apache, SQUID, and my understanding is, various mechanisms within various ACS versions. None of these solutions would require installing the source to AOLserver.
AOLserver itself isn't bug free, and the state of the art for AOLserver is for bug fixes to be released as source patches.
I would probably not install it both ways, especially if you're new to the system. It won't hurt, but it may be confusing.
