A related problem:
When I type http://localhost/myblog I get redirected to the live site on production server.(I have made the changes in the wordpress)
When I type http://localhost/myblog/wp-admin, it goes correctly to the local site's admin interface.
Again from the admin interface, I can't navigate to the local site cause it takes me to the production site.
The changes I made:
UPDATE wp_options SET option_value = 'http://localhost/myblog' WHERE option_value = 'http://www.example.com';
The permalink settings are as follows(default . does that matter?)