I realize now that the Activation page for BuddyPress was not active. I have added this page. Now the authentication goes to the registering user, but it says authentication key invalid.
Is this a bug? Has anyone fixed this on their site?
Even though the activation key is said to be invalid when clicking the authentication email, the new user is still created.
After creating a test account I see the authentication key error. However, if I click sign in from this point the new user account works. I was able to login.