front page will not show

I just created a network following the instructions at the codex Create_A_Network and following the advice of a number of the posts here.
The only thing is the front page of the sub-directory only shows
Index of /lufashion with a link to the parent directory.

I can create new pages and the show up no problem, but once I go into settings -> reading and select a page as front page it disappears regardless of whether it is a static page or not

I am have verified that my .htaccess is exactly the way it is supposed to be, as well as the wp-config.php file. My directory(S) have the right permissions.

None of the themes or plug-ins are network activated, there are no active plug ins for the sub site which is using the twentyten theme.
Changing the permalinks from ugly to pretty and back again do not change anything either.

Anyone tell me what I am missing?