WordPress MU

problem occurs when i create new blog, for example test.site.com. Links don't work in subdomains. when i try to open any link in this subdomain, browser response is something like this:

Not Found

The requested URL /archives/category/uncategorized was not found on this server.

Is the root .htaccess file populated? (ie Does it have stuff in there?) IS it simular to what's in the htaccess.dist file?

Anything in your webserver's error logs? (Just for reference, you should be checking that even before posting. First place most system admins would look.)

Got a link? We may see something that you haven't.

I've got a similar problem with my mu installation:
All my local links to .zip files or .pps files or to .txt files (for downloading) don't work.
I'll probably add my old htaccess data into the new htaccess file and see what happens...

WordPress MU is trying to setup subdomains for each of my new users on BuddyPress and the sites are coming up as a page from my host saying this site hasn't been setup yet.

Here is my php error log:

[Thu Mar 05 14:31:47 2009] [error] [client 66.249.71.58] Request exceeded the limit of 10 internal redirects due to probable configuration error. Use 'LimitInternalRecursion' to increase the limit if necessary. Use 'LogLevel debug' to get a backtrace.
[Thu Mar 05 14:34:51 2009] [alert] [client 12.88.5.134] /home/chedstone/webapps/modbuzz/.htaccess: RewriteBase: argument is not a valid URL, referer: http://modestobuzz.com/members

I guess your .htaccess has
RewriteBase: Base
Instead of:
RewriteBase: /

Ask your webhost admin to set wildcard access to your domain. What it does is - it redirects every subdomain access back like subdomain.website.com to website.com and this takes care of all the issues. I solved using the same at http://www.bitcolors.com