I set up something similar for myself recently, using the OpenID delegation system:

<link rel="openid.server" href="http://www.livejournal.com/openid/server.bml>;

<link rel="openid.delegate" href="http://andrewducker.livejournal.com>;

which now means that I can use andrew.ducker.org.uk as my OpenID, and any third party I like to confirm that. Very useful if I want to move my provider by keep my ID.

Not really, this is delegation, which was in the spec for 1.0.

To really host an openID provider on your own domain, use http://seige.org/projects/phpMyID. It's pretty simple to set up.