Not being allowed to use some terms in Add New Site in WordPress

http://codex.wordpress.org/Create_A_Network#Permalinks

/blog cannot be used as a new site name. It is relied on heavily by WP for the main site. Everything added to it automatically has /blog as part of the permalink from my understanding

You can check out this discussion
http://wordpress.org/support/topic/root-directory-blog-for-wordpress-30-main-multisite
to see if it helps you out, gives some further options.

The main issue with the /blog is to prevent collisions. I’m not sure of the repercussions of not using it, when using subdomains

I’m not sure if you can easily switch from subfolders to subdomains….. I would think that would cause some issues. I think when you transfer over, the existing subsites are not switched…. so if you set it up one way, and try to change, there may be some headaches

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