Steve,
I saw this happen with just one of my users in the past when we were first rolling out the Pilot with KN. This really isnt a KN issue as much as it is a MOSS issue. First lets try and isolate the problem..... can others create a mysite? If so do the following.
You will need to go into your SSP and look inside the User Profiles and My Sites section and inside that open up the User Profiles and Properties. You will need to see if your user profile is in the list and if so delete it (this will have no ill affect and it will be brought back in on the next update) Make sure you do an incremental update after you do this!!!!
Another area is to go into your Central Administration / Application Management / Sharepoint Site Management and open the Delete Site Collection. When that opens you will need to change the site collection to point to your MySites and if you see your profile name in there click it and delete it.
Remember that each MySite is its own individual site collection so your not affecting other users here. This may or may not be listed depending on when the operation timed out.
Try to create your MySite again the normal way...... click MySites on the top right corner.
This issue your facing could be due to a corrupt profile.... as I said i saw this happen once and these steps did fix the problem.
Post back to let me know.
Thanks for the reply Bob, unfortunately it is all users, I agree it is a MOSS issue. I tried yesterday after I had removed KN, and the problem still occurs. I don't want to have to rebuild MOSS again if I can help it. I and others can create other sites, just not my site. Initially I was getting a managed path error even though I could create sites under the same path. I have tried pointing mysite at the other sites on the same server, still get a timeout.
I am starting to suspect an issue with our proxy/firewall as I notice a lot of disk activity when trying to create mysite, both on my PC and on other users. If I can figure out what actually happens when I click mysite, I might be able to figure out what is blocked.