The .htaccess file that WordPress generates during installation is suboptimal.
The primary issue is that, "out-of-the-box", the .htaccess file functions properly only when the location of the WordPress installation does not change.
In a collaborative, version-controlled environment, it is unreasonable to expect that every developer places every WordPress project in his Web-server's document root. However, the .htaccess file at the root of the installation seems to be generated with this expectation.
I hardly ever use WordPress, so I can't speak to the evolution of this issue, but I seem to recall WordPress including the .htaccess file in the actual source package at some point in the past (as opposed to the file being generated dynamically during installation). If my recollection is correct, perhaps the fact that the file is generated dynamically now is in an effort to address the issue I've outlined herein.
The following issues are at the core of why clean-URLs are not accessible when the WordPress installation is not at the Web-server's document root:
a.) the leading / before index.php in the last rule (RewriteRule . /index.php [L]); and
b.) the RewriteBase / directive
Again, I don't know enough about WordPress to know whether the proposed adjustments will "break" other functionality, but it seems that two simple adjustments would alleviate this problem entirely.
# BEGIN WordPress
<IfModule mod_rewrite.c>
RewriteEngine On
RewriteRule ^index\.php$ - [L]
RewriteCond %{REQUEST_FILENAME} !-f
RewriteCond %{REQUEST_FILENAME} !-d
RewriteRule . index.php [L]
</IfModule>
# END WordPress
With these two changes, I am able to move the WordPress installation to any subdirectory of the Web-server's document root and clean URLs continue to function as expected.
As a related corollary, the above changes do not address the fact that WordPress stores core configuration directives in the database, so the developer will still need to adjust the 'siteurl' and 'home' values in the wp_options database table whenever the installation is moved.
P.S. This forum software is inserting HTML markup into my post (specifically, between the code tags) whenever I edit the post.