BuddyPress.org

I could see why that wouldnt work, as buddypress is build on wpmu and every blog you make is basicly a seperate wordpress install. So for example the users that were automatically subscribers on your wpmu blog aren’t automatically subscribers on all the blogs on your wpmu install.

WordPress itself has problems with relocating it’s position, a lot of changes need to be made and since buddypress is build on wordpress, buddypress has these problems now as well.

I don’t really get why your placing buddypress in a sub blog, you can easily change the buddypress theme to your liking if that’s the problem.