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Howdy,
Can you describe your server setup? For example, what distribution/version are you using? And how did you do your Virtualmin installation, was it with the install.sh script?
Typically on a Grade A supported OS (as seen here: http://www.virtualmin.com/os-support.html), you wouldn't run into that issue you're seeing.
For Grade A supported distributions, Virtualmin provides a version of Apache with a custom suexec that works in /home, rather than the default of /var/www.
However, if you have a distribution Virtualmin doesn't recognize... or perhaps have a third party repository installed that provides it's own version of Apache, it could cause problems with the normal installation.
If you just wish to use mod_php, you could always disable suexec, so that it doesn't give you a hard time about how suexec is setup.
However, CGI/FCGID is more secure, and is what we're recommend in most setups... but that requires an suexec version setup to use /home.
-Eric