Syndicate WordPress?

My organization operates a network of private-label Web sites and is currently investigating the possibility of offering blogging tools as part of our service. The blogging system would need to scale to ~500 sites and support up to 1000X that many bloggers. Any ideas/suggestions of how something like this might look architecturally with WordPress as the base? Anything like this already on the market? Are there any potential pitfalls that leap out? Thanks.