So if you you have not been following this saga, please read these two blog postings to get you up to speed:
My Site Creation Error
MySite Creation Error, continued
The short version was that Microsoft changed the supported architecture for MySites. Under SharePoint 2003, you could have the location of your MySites within the hierarchy of a web application. In MOSS2007, the location of the MySites had to be it’s own web application. The second blog entry contains some work arounds if you upgraded a site with MySites from 2003 to 2007.
I just heard from Microsoft today that they will be releasing a hot fix for this issue sometime in May. Check back for more details…