I just wanted to add a follow up as this thread seemed to end without resolution. The domain I was trying to get subsites to work with is on a shared host (linux, apache 2.2.15, php 5.2.13) using cpanel.
I was eventually able to get the module to work using ss2.4.1 with the version of subsites dated 7/23/10 pretty much right out of the box. The only thing I had to do was create the sub-domain with cpanel, add an htaccess file with "RewriteEngine off" and an index.php file directly to the sub-domain's directory. That was it. I did not have to change anything in the index file, add any additional code or re-write any of the core code.
This worked with sub-domains created from the original domain (IE: subdomain.maindomain.com) as well as completely different top level domains pointed to the primary domain. (IE: differentdomain.com pointed to the maindomain.com account).
It is well documented that I am not a php whiz, however it has been my experience that any time I try to use a cms with cpanel (that's any cms) I end up spending a lot of time "fixing" things. Sometimes that means doing a lot of rewrites, sometimes it's just a matter of doing things differently than the directions.