jerxs, yes, you have it right. That is what it is intended for. It's definitely worth slapping on a dedicated box for a popular domain to make that domain even more popular.
Had you asked here for something like this, I would have pointed you right to this. Typically, the only way to have a large scale site like this would be to hire it out and spend thousands. When I discovered MU a few months ago, I couldn't believe it.
Since nobody has pointed a link to it and newbies apparently don't know how to "google," here it is:
WordPress MU › Home