I had WP installed at the root of my site and upgraded to 3.0 and followed instructions to create multisite network. I also have a sub folder with WPMU installed.
My permalinks work.
I updated wp-config and htaccess with the code generated from the network install.
My WPMU install creates the folders with no problem and I am using the same user/rights in the database.
The original install created a sub-domain setup and I changed it to sub-directory according to a post I found in the forum.
Do you think the problem with the blogs not being created has something to do with having a WPMU install on the same server, even though it is in a subdirectory. I know when I installed WPMU I had to comment out some lines in wp-config in the root folder to complete the installation?
Thanks in advance.