I had to make the changes in the below diff to the 2005-12-17 nightly, one to make cookies work and the other to figure out the blog name from a url with a cgi param. Also, I had to copy htaccess.dist to .htaccess and replace 'BASE' with '' in that file. I'm not sure if these are bugs in this particular nightly or if I mucked something up in the process, but I'm providing them in case they help other folks. I'm still testing, but everything seems to be working well now.
The symptoms for me were 1) getting a blog not found error (fixed by the param fix in the diff below), then 2) getting thrown back to the login page with no error message on what should have been a successful login (fixed by uncommenting the cookie settings in the diff below), and then 3) not being able to find a newly created blog (fixed by copying and editing the .htaccess file).