I created the first new blog in my WPMU installation by turning on the option to allow user and blog creation. I then logged off and went through the procedure for a visitor to create a blog. This worked fine. I then turned the option for creating additional blogs and users off.
The next step was to try creating a new blog manually as admin. I created a new blog and entered the same email as the first additional blog so that a new user would not be created. If I had entered an email address that was not already in the database apparently a new user would be created (presumably with the blog name – the bit that forms part of the blog url – as a user-name) and an activation email would be sent to that email address.
When I viewed the new blog I got the ‘not found’ page. When I logged out as admin and back in with the user-name and password of the new blog’s user I had the same problem. The new blog was listed under ‘My blogs’ but wouldn’t open. I logged back in as admin and deleted the new blog, went to the options page and turned on the option to allow user and blog creation. I then manually created a new blog and this time it worked fine. The lesson seems to be that the create blog option needs to be set to on for admin to manually create a new blog. If this is correct it is a bit of a pain as, if public blog creation is to be disallowed then the option will have to be turned on and off every time admin wants to create a new blog manually.