Your personal site cannot be created because Self-Service Site Creation is not enabled.

From SharePoint Knowledge Base

When choosing to host My Sites in the main portal web application, this error can start showing up when users try to create new My Sites. Unfortunately the error message indicates that you must enabled Self Service Site Creation to make this work. And most of the blog posts out there lead you in this direction as well. However, this is not necessary.

To resolve this error, add the Application Pool account that is hosting My Sites to the Farm Administrators group. Then execute an IIS Reset. After that, users should be able to create new My Sites.

Step by Step Walkthrough

First you need to find the Application Pool account that is running the Web Application which is hosting your My Sites.

1. Open up Central Administration
2. Click on the Operations tab
3. Under the Security Configuration section, click Service Accounts
4. Click the Web application pool radio button, choose Windows SharePoint Services Web Application item in the first drop down, then select the web application used to host My Sites.
5. Make note of the account being used for the application pool. You will need this in the next set of steps. If you are using Network Service or Local Service, you may need to change to a named domain account.

Next, add the account you identified in the steps above to the Farm Administrators group.

1. Open up Central Administration
2. Click on the Operations tab
3. Under the Security Configuration section, click Update farm administrator's group
4. Click New
5. Enter the account identified in the steps above in the Users/Groups textbox and click OK
6. Open a command prompt all of your SharePoint servers and run iisreset

Additional Troubleshooting

If the error message continues to appear, and you are accessing the SharePoint portal site using a custom host header, with Windows authentication enabled, you will need to follow the steps in Microsoft KB896861.

Windows Server 2003 SP1 and later include a loopback security check that causes integrated authentication to fail if the FQDN supplied does not match the local computer name. As a result, even if you follow the steps above, the application pool user cannot authenticate successfully when it attempts to create the site.

Add all relevant FQDN entries to the BackConnectionHostNames value, e.g. extranet.contoso.com and srv01.contoso.local. Then perform a second iisreset to apply the changes.