I found a way to do this using the built in appcmd.exe tool. If you wanted to change your virtual directory “Images” inside your application “OldApplicationName” type this into the command line.
%systemroot%\system32\inetsrv\appcmd set vdir "Default Web Site/OldApplicationName/Images" -path:/Images2
More details, including how to rename applications here: http://www.foliotek.com/devblog/rename-applications-and-virtual-directories-in-iis7/