Suggested way to setup drupal to handle multiple subsites / subdomains?
Have you considered using the multisite setup? 


  This is particularly useful for managing the code since each upgrade
  only needs to be done once. Each site will have its own database and
  its own configuration settings, so each site will have its own
  content, settings, enabled modules, and enabled theme. However, the
  sites are sharing a code base and web document root, so there may be
  security concerns with multiple administrators


I've used this for setting up one codebase and then creating multisite installs of the codebase for clients who want similar websites. Multisites can be done as either subdomains (ie subdomain.domain.com) or subsites (ie domain.com/subsite). Each multisite install has its own database, and can have its own modules or theme even, but if there is core functionality you can put it in the root codebase and it will be shared across all multisites.