It's bad because they can change it and thusly break their links.
Of course they shouldn't change their permalinks! Have you ever met a client who always does exactly what they should, all the time? :D
Not sure if im missing something but if you go into the client sites permalink settings, the /blog/ is not there which means they can't really screw anything up. The client sites permalinks start from that sites name.. eg domain.com/Client_Site/hello-world/
Im using a sub-directory install. lets say you change /blog/ to a static term like /cheese/ (via network_admin>site>edit>settings)
As long as you black-list cheese in the "Banned Names" field (via network_admin>settings) so clients can't create sites called cheese, you wont have any problems with permalinks colliding..
RIGHT?¿? or am i completely missing something?
Im new to WPMU so forgive me if i've made this post out of ignorance..