I am thinking along your lines ESMI. I have spent the last three days trying to get a localhost mulitsite working and I keep running into brick walls - the last wall the perennial "host/subfolder1/wp-admin.php not found on this server" and tried various solutions with various results. This is getting too hard.
I believe in the KISS principal however that said I don't want to give in too easily either. It seems that there are specific issues with localhost / WAMP installations using multisite configurations.
I have achieved MySites admin page and that's it = 404.
So. Back to basics and install separate wp installs for each site including Databases - after all they are only a few Kbs in size.
I hope this post, along with those above, informs other users to draw a line in the sand. I can't waste any more time on this.
Catch you in the soup people :-)