Well, I don't think the .htaccess is really the problem. Even looking at your blog's feed at http://www.bipolarlab.com/feed/ all the posts go to the same projects URL and not the individual posts.
I could somewhat duplicate your problem by directly changing the "permalink_structure" field in the "wp_options" table of the database to be "/projects". Then, all my post URLs would be blog.markheadrick.com/projects
I was able to correct it by either replacing it with the value that was there, or changing the permalinks in options again. After I made that change, the permalinks options did show a customized setting of /projects and then the correct setting after I changed it. So, that may not be it.
If you edit the Contagious moods post, what does the Post Slug on the right side show for it?
The only other thought I have is that you've modified the main index template in the theme editor such that it's not calling the_permalink() function to create the URL and it's hard-coded to be "projects".
<?php get_header(); ?>
<div id="content" class="narrowcolumn">
<?php if (have_posts()) : ?>
<?php while (have_posts()) : the_post(); ?>
<div class="post" id="post-<?php the_ID(); ?>">
<h2><a href="<?php the_permalink(); ?>" rel="bookmark" title="Permanent Link to <?php the_title(); ?>"><?php the_title(); ?></a></h2>
<small><?php the_time('F jS, Y'); ?> by <?php the_author(); ?> </small>
<?php the_content('Read the rest of this entry »'); ?>
<p class="postmetadata" style="clear: both;">Posted in <?php the_category(', '); ?> | <?php edit_post_link('Edit', '', ' | '); ?> <?php comments_popup_link('No Comments »', '1 Comment »', '% Comments »'); ?></p>
<?php endwhile; ?>
<div class="alignleft"><?php next_posts_link('« Previous Entries'); ?></div>
<div class="alignright"><?php previous_posts_link('Next Entries »'); ?></div>
<?php else : ?>
<h2 class="center">Not Found</h2>
<p class="center">Sorry, but you are looking for something that isn't here.</p>
<?php include (TEMPLATEPATH . "/searchform.php"); ?>
<?php endif; ?>
<?php get_sidebar(); ?>
<?php get_footer(); ?>