Thanks for the update!
I thinks its more a problem of lack of documentation and clarity in terminology.
Anyway I got the job done, and I'll take a look at seeing if I can script it if people would be interested, but php is not my strong suit.
What I have set up is wordpress mu with the multisite add in. This allows me to set up blogs as subdomains, but currently I have to edit the vhost file manually at the end of the process to make it point back to the wordpress mu directory containing the php.
So for example. If I have an ISP Config host as server.mydomain.com
I create and add a new vhost blogs.mydomain.com. Without the multisite add in you would be limited to either blog1.blogs.mydomain.com or blogs.mydomain.com/blog1. The wordpress code is held in /usr/share/wordpressmu, much like phpmyadmin, and a single database supports all blogs.
With my process its relatively straight forward to have
Current issues are
1) Single database so security is not great but performance is good.
2) Have not thought out delegation of blog site administration, urls are nice, creating the right users is just not clear.
So for example its easy to have
Site Admin url is <anyblog URL>/wp-admin.php