I want users to be able to upgrade to a FQD after the signup. E.g. they get a subdomain first (theirname.myname.com), but if they wish, they can get a domain (theirname.com). Is this something that can be done with off the shelve solution or via a plugin?
Thank you!
Yup, it's called 'domain mapping' here and has been much discussed with a number of different solutions previously discussed. I would suggest searching the forums.
The easiest method would probably be this solution:
http://wordpress.org/extend/plugins/wordpress-mu-domain-mapping/