I had this issue when activating the Permalink structure, as soon as I put in the .htaccess file, I would get a 403 Access Denied.
It drove me nuts for awhile, before I found that Apache's error log was saying that since
Options FollowSymlinks was not enabled, then the rewrite engine should be forbidden.
Options FollowSymlinks to my virtual server setup, and it worked.
Just FYI, if anybody has this issue.