Would hosting blogs for free and put Adsense on them (for other people) be allowed, and would it be a good idea? I would give them a sub-domain on a "blog-ish" domain and let them choose between a lot of premium themes (free ones). It's possible for me technically, so here I am asking for your thoughts.. What do you think?
Depends on how well you trust these people. They could post things against adsense terms. If you have a lot of different people with different blogs it could get time consuming to keep an eye on them. And if these people have some kind of administration to post an actual blog on there own, they could potentially remove them, unless you put the adsense code into the page or database itself that they wouldn't have access to. A bit of maintenance involved too probably. People are always messing things up, which you may end up fixing or helping them with. But it's a thought that might work, since you are the domain owner you are responsible for it.
If its like those free webhosting site with ads ... then maybe its okee with subdomain .... coz lots of ppl doing that ... but for safe side you may ask google that you will use there service like that ..
there should be no problem. Only, keep an eye on the users. the content should be according to adsense TOS.