Here is the scenario. We were greatly excited about the new mysites functionality in MOSS 2007. Since a lot of our internal users were not using MySites at all, the business decided that it would be ok to trash the Sharepoint 2003 mysites and users could build their mysites from scratch in MOSS 2007. The other reason this desicion was taken was from a governance and user adoption perspective - the business could tout this as a great new platform and get the users to use MOSS 2007 heavily as their collaboration area.
Needless to say, this made things easy. All of our content was in one big (100 GB) database in Sharepoint 2003, so all mysites came over as site collections using the personal managed path - which the migration automatically created for us. I could go ahead and delete these site collections and start afresh. Hence, I decided to create a new Web application that would separate the content from the big database into a new manageable DB as well as allow for more control and security. After creating a new web application, I created a site collection that used the MySite template (under the enterprise tab). I changed the settings within the SSP administration (user profiles and my sites --> my site settings) to use the new website. All I had to change was personal site services t0 https://mysiteswebapp/ and the Personal site location to 'personal'.
Then I went into my primary content web application and clicked on the mySite link. Lo and behold, I was directed to mysiteswebapp and a message appeared stating that it was creating the mysite for this user. However, I did run into an error which stated that the managed path 'personal' had not been created for this Web application. So I popped into Central admin and added a managed path called 'personal' for the mysite web app. I tried to create mysite again and this time it worked. Great success.