"Apple ID cannot be used for MobileMe" when setting up Find My iPhone app
Apparently, I had some issue when I was trying out the MobileMe for the trial period many months ago and for some reason couldn't use my primary Apple ID (my primary email address), so I created a me.com address for the MobileMe account. Eventually, I cancelled the MobileMe account because the cost wasn't justified for the features it offered. Unfortunately, that association with my primary Apple ID is permanent and THAT is the source of the "This Apple ID canot be used for MobileMe" error. Or at least that's ONE reason for it.
The solution? Create a completely new, separate Apple ID using a valid email address from which you can receive a verification email. The address is NOT used to receive any further emails from Apple. Only to create logon credentials. Do NOT associate this email address with your current/primary Apple ID or any other Apple ID. This is what you use to set up Find My iPhone/iPad, etc. using the MobileMe setup in Settings>Mail/Contacts/Calendars as well as the Find My iPhone App (plus it's your logon to the MobileMe Find My iPhone web page).
When you log in to the MobileMe page, BE CAREFUL WHEN YOU ENTER YOUR APPLE ID IF IT'S A FULL EMAIL ADDRESS: apparently, the ID field automatically tries to change it to "userID@me.com" instead of your "userID@emaildomain.com". Just check it before and after you enter your Apple ID password and submit.
I did this and it works. Find My iPhone app and service works beautifully. Spotted my iPad right where I'm at on a map. I sent a message to my iPad via the service (which also offers the option to play a sound, lock the device or even wipe the device).
I hope this information helps SOMEONE.
Oh...interesting footnote: I was informed that APPLE IDs CANNOT BE DELETED. Even if you create a "test" Apple ID (like I did during our troubleshooting session) with some barely used email account using a weak password. That means, regardless of whether you use it or not for MobileMe/Find My iPhone, you really, really need to give it a SECURE password (if you're going to keep that email account alive). So yeah, there are a lot of dormant Apple IDs floating around out there!
iPad 64GB WiFi+3G, iOS 4, Dell XPS One A2010, HP TX2525 Tablet PC, both running WIndows 7 Ultimate