Problem description:
You would note that as you modify the master page for your web app, only portions of the web application adapt the newly customized master page. This sucks because the entire admin area of your site still insists on a sharepointy look and feel.

This is because a major portion of the site uses Appmaster.master. But changing Appmaster.master ends up screwing every other web application on the physical machine - what a yucky choice.

Problem solution:
The best solution to this problem is, modify the definition for each virtual directory in the web application you are trying to customize. For instance, change _layouts to point to

\Program Files\Common Files\Microsoft Shared\web server extensions\12\TEMPLATE\LAYOUTS\MyCustomizedStuff

instead of

\Program Files\Common Files\Microsoft Shared\web server extensions\12\TEMPLATE\LAYOUTS

and then do a copy paste from \Program Files\Common Files\Microsoft Shared\web server extensions\12\TEMPLATE\LAYOUTS

to

\Program Files\Common Files\Microsoft Shared\web server extensions\12\TEMPLATE\LAYOUTS\MyCustomizedStuff

Lather, rinse, repeat for all virtual directories - and bingo - you now have a clean system working that can serve multiple websites.

SHWEET!!