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Domestic policy are laws, policies, etc. that are set in place within a specific country. An example of a domestic policy within the Unites States would be social security.
Foreign policy are those policies that deal with the relationships we have with other countries. It has to do with the interaction that a country has with another country. An example of a foreign policy is the United Nations.
Both of these impact the United States. Domestic policy has to do with how we live each day, including education, taxes, environmental protection/laws, welfare programs, etc. Foreign policy has to do a lot with international trade, peace keeping, etc.
I do not think that one is more important than the other. Both types of policies effect the way we live our lives every day.
Domestic policy is stuff like health care -- things that mostly happen within the US. Foreign policy is stuff like what to do about the Karzai government in Afghanistan -- things that mainly happen outside the US.
Both of them are very important. The domestic policy has more of an impact on our day to day lives, in general. However, huge things can happen in foreign policy (things like wars) that can have a huge impact. So both are important and I don't think you can really say one is more so.
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