How to allow new blogs creation
Be advised that WordPress 2.9 MU is no longer a separate project from the main WordPress branch. It is continuing development as part of the main WordPress 3 branch under the name ‘multi-site’ or MS. This means that you can get all the benefits of both WordPress and WordPress MU versions by using the latest WordPress version. To help you in the process of creating a multi-user website with the latest WordPress version we have created a detailed step by step WordPress multi-site tutorial available here.
When you have a newly installed WordPress MU you should allow new users/blog registrations first in order to allow your visitors to create their own blogs. This can be done via the admin area of your WordPress MU. You can access the admin panel via the login link on your home page
From the admin area you should navigate to Site Admin -> Options tab:
Now your visitors can register and create their own blogs by directly accessing the required address https://new-name.yourdomain.com or via the create a new blog link on your home page.
If you would like to start your WordPress MU Blog in a few clicks, check the WordPress MU Hosting package.