Blogs will not install upon creation.

When users try to create a blog, a number of those created (and now, almost all of them) are not created, and instead, we receive the following error: "The blog you have requested is not installed properly. Please contact the system administrator."

We have looked through a multitude of tickets and forum topics on the subject, but we have not located an answer to this problem. Earlier today, I defaulted the config's Default Charset option from utf8 to an empty string, per the random advice from forum topics, and it seems like we've not had any luck so far. This issue has been going on for months. We've been able to avoid the issue slowly as the site grew by disabling some of the bulkier plugins from the WPMU site (Firestats and Sociable among them). But now, with over 1,000 registered blogs, the problem has become nigh unavoidable.

Has anyone been able to discover the root of this problem, and if so, how have they fixed it? I know a bunch of WPMU admins simply delete broken blogs and create new ones for the users, and this was our solution for those sporadic cases in April and earlier this month, but now it seems almost every blog fails upon creation. To top it off, we can't use the admin Add Blog feature anymore - the page halts during execution, throws back an error, and the blog is half-created just like the blogs that users attempt to create (to specify, records exist, but the blogs do not load, and users are not linked to those blogs). The other popular solution is to completely reinstall the platform, which we will do in time, but I don't want to find that the problem recurs after 500 blogs on a newer installation.

Our website is http://storeblogs.com/.

We use WordPress MU 2.6. We do not use multi-DB or any scaling solution, and we do not use BuddyPress. We do, however, have plans to recreate the WordPress install using WPMU for WP 2.8 with the 256 table Multi-DB solution and BuddyPress (should Multi-DB and BuddyPress be able to coexist).

Here is our config file, sensitive information x'd out:
<?php
/* Don't try to create this file by hand. Read the README.txt and run the installer. */
// ** MySQL settings ** //
define('DB_NAME', 'xxxxxx'); // The name of the database
define('DB_USER', 'xxxxxx'); // Your MySQL username
define('DB_PASSWORD', 'xxxxxx'); // ...and password
define('DB_HOST', 'localhost'); // 99% chance you won't need to change this value
define('DB_CHARSET', '');
define('DB_COLLATE', '');
define('VHOST', 'yes');
$base = '/';

// Change each KEY to a different unique phrase. You won't have to remember the phrases later,
// so make them long and complicated. You can visit http://api.wordpress.org/secret-key/1.1/
// to get keys generated for you, or just make something up. Each key should have a different phrase.
define('AUTH_KEY', 'xxxxxx'); // Change this to a unique phrase.
define('SECURE_AUTH_KEY', 'xxxxxx'); // Change this to a unique phrase.
define('SECURE_AUTH_SALT', 'xxxxxx'); // Change this to a unique phrase.
define('LOGGED_IN_KEY', 'xxxxxx'); // Change this to a unique phrase.
define('SECRET_KEY', 'xxxxxx'); // Change these to unique phrases.
define('SECRET_SALT', 'xxxxxx');
define('LOGGED_IN_SALT', 'xxxxxx');

// double check $base
if( $base == 'BASE' )
die( 'Problem in wp-config.php - $base is set to BASE when it should be the path like "/" or "/blogs/"! Please fix it!' );
// You can have multiple installations in one database if you give each a unique prefix
$table_prefix = 'wp_'; // Only numbers, letters, and underscores please!

// Change this to localize WordPress. A corresponding MO file for the
// chosen language must be installed to wp-content/languages.
// For example, install de.mo to wp-content/languages and set WPLANG to 'de'
// to enable German language support.
define ('WPLANG', '');

// uncomment this to enable wp-content/sunrise.php support
define( 'SUNRISE', 'on' );

// Uncomment and set this to a URL to redirect if a blog does not exist or is a 404 on the main blog. (Useful if signup is disabled)
// For example, browser will redirect to http://examples.com/ for the following: define( 'NOBLOGREDIRECT', 'http://example.com/' );
// define( 'NOBLOGREDIRECT', '' );

define( "WP_USE_MULTIPLE_DB", false );

/* That's all, stop editing! Happy blogging. */

if ( !defined('ABSPATH') )
define('ABSPATH', dirname(__FILE__) . '/');

require_once(ABSPATH . 'wp-settings.php');
?>