Thanks, I came across an answer at Server Fault a few days ago. .htaccess support is disabled by the sysadmin, but he was willing to change httpd.conf for me.
But you're right, you can put the same rewrite block in httpd.conf as in .htaccess and wrap it in <directory> directives to allow it to work only on a particular directory.
You still have to set permalinks in Settings/Permalinks so that WP and the database know about the permalink settings. And then you can ignore what WP says about the .htaccess being updated after you set permalinks. If directory permissions are such that WP can write an .htaccess file, it's best to go ahead and delete it.
So set permalinks, copy the required changes to .htaccess and add that rewrite block to httpd.conf, reboot apache. Delete .htaccess if generated.
But the redirection plugin you point to requires .htaccess, which are not allowed and ignored when .htaccess support is not enabled in httpd.conf