Re: Users unable to create blogs
Looks like you’re going to need to use sub directories instead of subdomains. Don’t worry, as they work identically, but instead of blog.yourdomain.com, you’ll have yourdomain.com/blog
(This is also more of a WordPress MU support question, but because others may benefit from this too, lets discuss…) 
Stop me if you’ve heard this, but it should be a semi-easy fix.
in wp-config.php, change…
define('VHOST', 'yes');
to
define('VHOST', 'no');
and make sure…
$base = '/';
Then, you’ll want to dive into either phpMyAdmin, or each of your blogs admin panels and edit them individually, just making sure that the paths to each of the blogs are correct.
