I have been trying to use subdomains for my drupal site.

Here's what I have done:
1. I install a new drupal site using Fantastico using mydomain.com/site1
2. I then create a subdomain site1.mydomain.com

> When I try using subdomain url 'site1.mydomain.com' the drupal welcome-page erroneously displays all text without any images
> However, when I try using mydomain.com/site1, the drupal welcome-page display very nicely with all colors and logos

I have been looking into the forums for some time now and I could not find anything on this error. I am thinking that if get this error fixed, then I can use the multi-site feature of drupal using subdomains (and also parked domains).

Thanks for any help.