Yes its possible for you to create pages and blogs for as many users as you like but there is not a way to automatically provision the blog and pages and setup permissions. Currently these are manual steps.
Keep in mind that the blog was designed for trusted users. It allows embedding javascript and video and all kinds of things that are not safe to allow strangers to do because these things can be used for bad purposes like malware, cookie stealing, cross site sripting, etc.
Hope it helps,
Joe