I thought I'd share my findings for anyone going through the same problems I encountered. I want to be able to give different roles to members on each blog, and at first it wasn't quite obvious.
Firstly, if you give a member a role on the main blog (blog id "1"), that role will cascade down through the rest of the blogs. So if you make a member "administrator" of blog 1, they will be administrators on all of the blogs. If you want a member to have different roles per blog, be sure to give them "subscriber" role on blog 1 to start with.
So, lets say we want member with username "bob" to be an editor on blog 2 and a contributor on blog 3. The first thing you need to do is make sure bob has an account with "subscriber" role on blog 1. This gives him "subscriber" on all the blogs. Make note of his email address. Now log into the blog 2 wp-admin as an administrator, and ADD a new user, giving the same username (bob) and email from the existing account, but changing the role ("editor" in our case). WPMU will recognize this as an existing member, and just add the new role for the given blog (2). Be sure the username and email EXACTLY match. If the email does not match exactly, you will get a "user exists" error.
For blog 3, log into the blog 3 wp-admin as administrator, ADD a new member again, matching the user/email, and set the role ("contributor" in our case). This will add the contributor role for blog 3 to bob's account.
Hope that helps!