Ok - The GuestBook directory should be located in a directory below your Public directory (or where ever you place your all of your files that can be seen on the internet).
You do not need to run PHP in a CGI-BIN folder. You might want to make sure that you can run PHP on your server. One really easy way is to create a PHP file called 'Test.php' then include the following Code in it:
<?php
phpinfo();
?>
Just upload this file as you normally would then type in
http://www.yoursite.com/Test.php in a browser.
This will give you a good idea of all the configuration settings and how your host has PHP setup for the server.
All the files should be located in the same directory - they do not have to be but for simplicity and the first time using it, it's easier that way. After you get it working then you can experiment with different setups.