I performed a clean MU install, and everything worked perfectly first try. Tinkered for a bit, then added added a user to test the subdomain setup.
I tried logging in as that user, and I got back this message:
You do not have sufficient permissions to access this page.
Then I tried logging in as admin, and no luck either. Page access at wp-login.php is redirecting to /wp-admin/profile.php, and returning the same message.
Any thoughts here are appreciated!