How can I host a Blogger blog on my domain's directory?
For example domain.com/blog, instead of blog.domain.com or blog.com.
I have looked everywhere but it seems for Blogger it is only possible to host on the main domain or on a sub-domain.
I am afraid you are correct when mentioning that:
...it seems for Blogger it is only possible to host on the main domain or on a sub-domain.
To do it otherwise it would require an edit to their .htaccess file or their database which is most unlikely to happen.
Changing the CNAME records can only give you a main domain or sub-domain at the very best.
If you look around though, you may find some possibly outdated as well as not so reliable solutions that you could try.