To cut to the chase, the process of creating a new subsite using WSS is as follows:

  1. Connect to the main site using SPSite.
  2. Add the new site using the Add() method on AllWebs collection.
  3. Do all kinds of magic using the newly created site.

Here is a small C# code example:

SPSite rootSite = new SPSite("http://testsite");
SPWeb site = rootSite.AllWebs.Add("testsub");

In order to access this site you need to visit “http://testsite/testsub”. Hope this helps!