When you have SocialEngine installed within your root directory you may find yourself unable to create sub-domains without getting an internal server error.
This happens as SocialEngine like to take control of the whole site but there is an easy and simple fix for this.
When creating your sub-domain upload the files you wish and if the uploaded files contain a .HTACCESS file all you need to do is open this file and edit one line.
Change the On to Off
If you do not have a .HTACCESS file create one and add this coding.
<IfModule mod_rewrite.c> RewriteEngine Off </IfModule>
Save and upload to your sub-domain File
Hope this helps you out.