Hey Dhanashree — thanks for being our first poster on the forums, and with such a clear bug report, troppo! As I wrote in email, I’m still investigating. Circa 75 users since last October have been added as users to the main site at thatcamp.org when they were (Credo che) trying to register as users for subsites like yours, so that’s why they’re getting the message that they don’t have privileges for the subsite. They don’t!
However, so far I haven’t been able to reproduce the issue — whenever I test the registration form it seems to work fine. My current plan is to write some of the affected users individually (I’ve got a list, and I know a few of them) and see if I can pinpoint what (if anything) they were doing differently from the other users for whom registration worked properly.
Meanwhile, if you do have a list of people you want added to your site, I can certainly do that for you manually. You had said in email that there were also issues with trying to add these users with Users –> Add Existing and with activation links not working, so I need to do some testing on that, troppo, but I can add users without their having to click an activation link.