Here are some "gotchas" that I ran into.
1. First, you will need to be sure that your web hosting account has Apache vhost and wildcard DNS activated. (Usually it's just a matter of sending them an email if these aren't available by default).
2. Be sure your WPMU files are CHMODed to 777.
3. Resist the temptation to rename htaccess.dist and wpmu-config.dist. Leave them be. Just be sure they (and all the other files in the installation) are CHMODDED to 777 WPMU will do the rest.
4. Be sure there is NO .htaccess file sitting in your root already. That's why WPMU provides its own htaccess.dist. So delete or rename any .htaccess file already present.
5. You should already have a database set up, and a user assigned to that database. You will need to supply WPMU with this information.
6. To proceed with the installation, go here:
http://yourdomain.com/index.php
NOT: http://yourdomain.com/wp-inst/index.php
7. Hopefully, if all went well, you can now login to your newly minted install of WPMU.
8. EDIT THIS FILE: In your wpmu/admin folder, there is a file called wp-newblog.php. You need to change the text in there where it tells the new user that his/her new blog will be at [username].WORDPRESS.COM to whatever your domain is.
Hope this helps someone else.
Joni Mueller
http://petdiaries.net