Thanks for the explanation of how WPMU works. I couldn't find that in the README or FAQ.
Also, I have noted people who have the most issues are running an install in a subdirectory off a subdomain. It wasn't really meant to be used like that. I would imagine internally it creates a mess.
So, basically what you're saying is that if I have the install in /WPMU I still need a VHOSTS directive in apache.conf that maps something like 'blogs.earlham.edu' to this directory? The README file refers to installing in the root of the domain or a subdirectory but it's not clear that it won't run directly from that subdirectory off the subdomain. Doing the VHOST thing requires that the DNS gets set to map 'blogs.earlham.edu' to 'myhost/WPMU/' right?