I believe that plugin works by pulling permalinks from the wp posts table.... it doesn't spider per se (I use that one too).
so if each blog is using a different posts table in the db it will generate the sitemap.xml based on it's root directory
I would make sure you add a line to the robots.txt in your Document Root pointing to all the sitemap files
Sitemap: http://www.<yourdomain>.com/<the sub directory>/sitemap.xml.gz
Google, yahoo, and MSN search the robots.txt for sitemaps or so I understand
Later,
Ric
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