I can see this being a bit complicated, attempting to run BuddyPress on WPMU, and yet not have it on the root blog. The one time I’ve done this is through the use of a multi-site plugin I got from http://ronandandrea.com. I’m thinking when BuddyPress is installed on a WPMU site it ends up being installed as a site wide plugin, across all blogs. The above mentioned plugin allowed me to set up a new blog to function as ‘root’, as if it were a different WPMU site, and I did successfully get this up and running without having buddypress interfere with my previously created blogs. This can be a bit complex though as not all plugins are necessarily ‘site-aware’.
Also, as far as updating WPMU to 2.9.2, I’m thinking that would need to be done for your root blog, and then after you need to go to site admin, and hit upgrade to upgrade all your blogs to 2.9.2, at least that is what I do when I upgrade.