I do have the very same issue, absolutely frustrating, even more to see there is no idea about the issue and how to fix it.
No groups, then no forums, then useless WPMU site.
Hope we get somethign soon.
I am new here and just installed WPMU and Buddypress. This is my current issue:
Whenever Permalinks are not set to Default but to any other option, every page-link stop working.
The pages and links do normally work without a problem as long as Permalinks are set to Default.
Then I leave them working Default, what automatically stops Buddypress, since, according to message I get, Permalinks are required to get Buddypress work.
My server is Windows so I have erased the .htaccess file as directed by data provided for WPMU installation under windows server.