Changing Permalinks results in 404

I have installation installed at httpdocs/news . In that folder I have a WP .htaccess file with the default rewrites I need:

DirectoryIndex index.php

# BEGIN WordPress

<IfModule mod_rewrite.c>
RewriteEngine On
RewriteBase /news/
RewriteCond %{REQUEST_FILENAME} !-f
RewriteCond %{REQUEST_FILENAME} !-d
RewriteRule . /news/index.php [L]
</IfModule>

# END WordPress

Anytime I change permalink settings, it rewrites the .htaccess to a blank file like:

DirectoryIndex index.php

# BEGIN WordPress

# END WordPress

When I change the permalink settings, the URL stays the same but the page is a 404.

Biggest question is why when I change my permalink settings, the 404 happens, and why when I manually upload the .htaccess with the right rewrites, no link changes happen.