Ted,
Thank You for such a quick response.
I found this link
http://blogs.msdn.com/infopath/archive/2007/02/14/forms-services-and-multiple-iis-web-applications.aspx
that describes running form services on multiple iis.
So basically, Best bet for us is to install infopath form server on the same machine that has our asp.net web application running on iis.
then use XmlFormView activex control to manipulate infopath form templates in the existing aspx pages.
As an alternative solution, can we use iframe from our existing aspx page to provide link to .xsn file (infopath temaplate) file that way
we can still be on separate server?
Any help is greatly appreciated.