Is every user going to potentially administer any other user? Sounds like some sort of touchy-feely woo-woo site to me, dude! :)
Off the top of my head custom pages to assign user master admin rights on user submissive directly would seem the simplest thing to do.
Groups and relsegs (subgroups in practice) really only make sense when there's structure to your communities as in .LRN (profs, staff etc within groups built for classes communities etc). Doesn't sound like there's much structure here.
