Separate WoW install folders protects you from nothing, zero, nada.
They don't care about your install location, name of folder, they care about the UID on the account, thats it.
Ski is right, if they want to trace back all the stuff a single toon has done, they can. Traded what to who, sold what on the AH, etc. How do you think they do restorations or even track all the little achievement stuff.
They store it all, so laundering it through multiple accounts to your main may seem like a smart idea (and one I follow as well), but in the end, you are just risking further accounts going bye-bye if this how they want to start doing bans.