This would be a bad idea
Because custom post types are not blogposts, they thus dont have the same features with URLs etc. Going this route runs counter to the intentions behind custom post types, which are intended for building web apps, e.g. an event post type or a ticket post type etc So there will be many things missing like date based archives etc
Also doing ti this way will complicate your content management and create headaches when trying to separate posts from different blogs in the same category. It will also mean that most plugins which make the assumption of blog posts having the post type ‘post’ will fail to work for your ‘faux blogpost’ post types.
Instead, I reccommend you go with a WordPress Multisite install. Have a root blog that acts as your homepage, and lists the different sites/blogs in the network etc, and then have sites/blogs in subfolders.
As an example, this is the basic core premise that powers the Nottingham University Blogs site: http://blogs.nottingham.ac.uk