Re: give each blog their own buddypress?
I don’t think anyone has tried anything like BP-Mu, and I am very doubtful that the internals would support such a thing without serious hacking.
BuddyPress *does* use the existing WordPress user tables/routines, etc. I have no idea what you mean by “separate user system.” You can just remove the BuddyPress /register files and use the WPMU user registration.
There’s no guarantee BP 1.1 will be released next week. Soon, but I’d advise not getting your hopes up.
As far as I’m aware, there’s no issues with running BP on a blog ID other than 1. If you want to be certain, download the current trunk copy and test it out; it’s not too late for bug fixes to go in.