What is the domain where you have WPMU installed?
For that domain ask your hoster to enable wildcard DNS and setup a proper ServerAlias.
Apache must be configured so that mod_rewrite works. Here are
instructions for Apache 2. Apache 1.3 is very similar.
1. Make sure a line like the following appears in your httpd.conf
LoadModule rewrite_module /usr/lib/apache2/modules/mod_rewrite.so
2. In the <Directory> directive of your virtual host, look for this
line
"AllowOverride None"
and change it to
"AllowOverride FileInfo Options"
3. In the <VirtualHost> section of the config file for your host there
will be a line defining the hostname. You need to add the following
if you want virtual hosts to work properly:
"ServerAlias *.domain.tld"
Replace domain.tld with whatever your one is, and remove the quotes.
DNS
===
If you want to host blogs of the form http://blog.domain.tld/ where
domain.tld is the domain name of your machine then you must add a
wildcard record to your DNS records.
This usually means adding a "*" hostname record pointing at your
webserver in your DNS configuration tool.
Matt has a more detailed explanation:
http://ma.tt/2003/10/10/wildcard-dns-and-sub-domains/
PHP
===
1. Don't display error messages to the browser. This is almost always
turned off but sometimes when you're testing you turn this on and forget
to reset it.
2. If your PHP is compiled with memory limit checks, the default is 8MB
which is much too small. You should increase this to at least 32MB or 64MB
to avoid PHP out of memory errors. Look for "memory_limit" in your php.ini
file.
3. GLOBAL variables must be turned off. This is one of the first things
any security aware admin will do. These days the default is for it to
be off!