Is there any blog software out there that would create a subdomain when a user registers?
For example...
xyz.com is the domain name
then a user registers with the username 123...
is the software capable of creating the subdomain - 123.xyz.com?
I know that server capabilities are necessary. And would the software work with all types of control panels?

Thanks

The only one I know (off the top of my head, that is) is WordPress MU.

It's not even in Beta testing yet, so there are quite a bit of bugs to be worked out.

In order to get it to do what you want, you'll have to have:

1) linux with apache web server
2) php and mysql
3) mod_rewrite
4) wildcard DNS entry
5) wildcard apache virtual host entry
6) LOTS of patience and plan to reinstall several times before launching