Everything was working fine!
I am using WordPress 3.0.1, the Blue Zinfandel Enhanced 2.0 theme.
Last night, I was trying the plugin WP Super Popup (link below):
http://wordpress.org/extend/plugins/wp-super-popup/
And my posting ability went berserk!
I couldn't delete the plugin from the dashboard. When I did the same from the back-end, I cannot submit posts. It's showing as 'submit for review'. The permalinks ain't coming! And although blogs are getting posted at some dynamic URL such as ....?post=821...they are getting saved as drafts at the dashboard.
Completely clueless what to do! Please help.