Hey thanks for your answer. HOWEVER, the situation is as desperate as usual, only a bit worse.
Now I finally managed to get my wordpress to install subdomains, I'm back to where I started because I'm getting:
Internal Server Error
The server encountered an internal error or misconfiguration and was unable to complete your request.
Please contact the server administrator, admin@localhost and inform them of the time the error occurred, and anything you might have done that may have caused the error.
More information about this error may be available in the server error log.
This is the error I was getting in the thread I opened up before this one, which I thought was over since I thought the error might have been I wasn't actually installing the subdomains from within wordpress.
So the situation is critical because this internal server error is completely incomprehensible.
Steps I took:
1. In order to make sure everything was on local.localdomain, I uninstalled Wampserver and installed it from scratch.
2. Extracted WP3.05 from the RAR.
3. Extracted it into the www file because the rules in the documentation say multisite won't work if wordpress isn't installed in the root.
4. Therefore I installed the wordpress index.php over the default index.php that comes with Wamp, whatever it means this doesn't sound good.
5. Left a file called testmysql among all these wordpress files, which again doesn't sound good.
6. In phpmyadmin set up a database called 'blog'.
7. Went to local.localdomain/wp-admin and was asked to give names to the database. Called the database the same as I'd called it in phpmyadmin, 'blog'. Called the user 'root', the host 'local.localdomain', and didn't put any password in.
8. Added the wp allow multisite line into wp-config.
9. Went to the Network submenu inside wordpress. Screamed horray when I saw the subdomain option available.
10. Said to it to install.
11. Created the blogs.dir folder inside wp-content
12. Copied the lines in the Network menu into wp-config and .htaccess as required.
13. I clicked on login and got the despairing horrifying message I should have been dreading but was ecstatic I'd thought I'd finally left behind.
14. Before all this, I already had the following already enabled in windows hosts file: