I fixed my domain forwarding and login issue by changing the database:wp_options value for “home” to my actual file location (http://mydomain.com/mydirectory/), leaving “siteurl” as the domain I want to access the site (http://www.myredirecteddomain.com).
I had made the change CliveW suggested, but undid this after doing the wp_options “home” change and it still works. I believe thats the only change I made.
The WP filters/actions don’t have the WPMU wp-newblog.php or wp-signup.php file or functionality. Am also wondering if there’s a way to prevent unauthorized new blog creation other than deleting wp-signup.php. I looked for a switch in the Site Admin tools.