Yes, this is simple. I've previously run a webfarm (using 1.3.27) with around 1000 vhosts configured on each server exactly like this - startup took a couple of seconds longer but otherwise there was little difference from a single vhost. Just specify a directory to contain the definitions for the vhosts (one per file) and set up a directory tree for each website. The machine I'm typing this at came with Apache 2.2 pre-configured to handle just such a case; in the httpd.conf there's a line:
And the create a file, say example.com.conf containing:
CustomLog /var/vhosts/example.com/logs common
You might want to create a user at the same time and point their home directory to the base locattion (/var/vhosts/example.com). I'd recommend disabling all cgi / shtml / php /symlinks etc unless you know how to configure these securely. Preferably allow override none too.
An alternative approach is to use a wildcard vhost with all requests routed to your front controller which would then invoke specific bits of functionality - but this requires rather a lot of development effort.