I’m guessing you’re using WP single/standard, and not WPMU/WP Multisite. The BuddyPress Groupblog plugin was written for WPMU/WP Multisite. The function, wpmu_validate_blog_signup(), is a WPMU/WP Multisite only function, which is why you get the Fatal Error. Because of the nature of standard WP versus WPMU/WP Multisite, I don’t expect you’ll get the group blog functionality on a standard WP installation… not anytime soon at least.
