In BP 1.5, we have the Groups page set to a child page, and the Create Member Group link wasn't generated correctly. It was something like
http://example.com/groups/create/?parent_id=20
when it should have been
http://example.com/sub/page/groups/create/?parent_id=20
I don't know if this gets at the root problem, but a fix that worked for me was on extention.php:333, change
bp_get_groups_hierarchy_root_slug()
to
bp_get_groups_root_slug()