If I understand you correctly, your brother doesn't have an account on DSiPaint, but is trying to create one on the HB Online site.
I don't think it's a bug. I think it's not allowing him to sign up because your IP address was already in use for the first account. That's the way it is for all the SDK sites, I believe. So your brother will have to sign up using an internet connection with a different IP.
Well signing up for Hullbreach Online on the PC/Wii version or the DSi version does the same thing. He should definitely try the activation link again because "page not found" can mean many things.
I recommend that he makes a DSiPaint account because it automatically creates an HB Online account (in the same manner as the reverse). And I'm sure the confirmation page for that is accessible.