"Technically" there is no reason it can't be done, it's just a policy thing. You'll find more and more shared hosting providers shying away from things like Mu which require wildcard subdomains. Too much room for abuse. And yes, you should be using the subdomain installation, because that's the right way to do it.
A couple of individual WP installs would likely be just as easy to manage - keep in mind that Mu is still fairly new and requires a lot of attention and updating. Even easier would be to just create one big team blog - give everyone their own user/pass and appropriate privilege levels, and then set up your theme such that visitors can read the latest sitewide posts, posts from a specific team/group (read "category"), posts from a specific author, and so on.
Unless your plan is to build a big blogging community Mu does not really make things easier. And if your intention is to build a big blogging community, you need to look for a VPS or Dedi instead of wasting time getting it to work on a shared server.