Solution was simpler than I thought (Thanks @Sumurai8 at Stack Overflow). Damn, .htaccess rewrites screw with my brain.....
# rewrite the URL: folderTwo/* to http://domainTwo.com/*
# as we want domainTwo.com/folderTwo to look like domainTwo/
# this works for any domain, so will rewrite:
# http://domain.com/folderTwo/*
# http://domainTwo.com/folderTwo/* etc
# to http://domainTwo.com/*
RewriteCond %{REQUEST_FILENAME} !-f
RewriteRule ^folderTwo/?(.*)$ http://domainTwo.com/$1 [R,L]
# redirects domainTwo.com to the PW /folderTwo folder
RewriteCond %{HTTP_HOST} domainTwo\.com$ [NC]
RewriteCond %{REQUEST_FILENAME} !-f
RewriteRule ^(.*)$ /index.php?it=/folderTwo/$1 [L,QSA]
muzzer's post in A Little Htaccess Help Please... was marked as the answer