Can you be more specific? How are you initially applying your custom
Master Page to the child site?

I originally allowed the new sites to inherit their settings  from the
parent site. I have also saved a site  template and used this to create
a new site. Both with the same result. As I said, once a site has been
created, it shows  the wrong master  page, but going in and changing the
master page  settings to my master page then corrects the problem.

There is also an msdn group with the same problem. -

forums.microsoft.com/.../ShowPost.aspx

Hope you can help with this

Without seeing your code I can only speculate (I did read the other
thread). I suspect that the initial Master page  is not the page that you
think it is. Otherwise, I would expect the error  to occur both when the
site was created and later when you manually apply  the custom Master
Page.

The only other explanation I can foster is that the timing is such that
the Master Page that you want to use in not available when the child
site is being created. If you'd like to take this offline and privately
email me the steps to recreate the situation, I will see what I can come
up with.

I tracked down the problem.

I think it was caused by lack of a list for my layout page.

I fixed the problem by saving the parent site  as a template and
including content. (But without any content in the site)

Now, I get an error  reported when the new site is first rendered, but
a refresh shows  the new site correctly.

Not quite sure yet what the complete solution is, but at least I am up
and running.