We got a very useful tip from one of our users (Carl Enbom) using WPLMS. 

This tip enables you to setup WPLMS and BuddyPress as a part of sub-site in a Multisite network. 

Since Buddypress runs over and above WordPress, the default settings do not allow buddypress to run a part of a sub-site. However, these instructions allow the user to override this limitation.

1. Make sure the WPLMS plugins are installed when you begin.
2. Create a network configuration using this guide: http://codex.wordpress.org/Create_A_Network
3. Do NOT add any sub-sites yet, that will cause some trouble for you with BuddyPress.
4. Follow the guide here: http://wordpress.org/plugins/bp-multi-network/
5. Create your new sub-site from the network admin panel. 
6. Make sure your plugins are not "Activated for network" in the network admin panel, DEACTIVATE these.
7. For each subsite, activate the necessary plugins here instead.