SO I have contacted Netfirms and they have in fact confirmed to me on the phone that there is no way to get pretty permalinks to work with 2.0. They said that they are planning on fixing it in the future but would not comment on when.
I have tried to change the permalinks structure on my blog http://www.WilyTrader.com to the index.php/ and that worked for most of the links but none of the links within the posts themselves got changed.
Subsequently My click through rate has been cut by over 70%!!!
So it would seem that I have no choice but to downgrade to WP 1.5 but don't know how. I have the backup of everything I did before the upgrade (about 2 weeks ago) but am affrai I'll loose everything I did prior to then if I just drag and drop the old backup files onto my server.
What's the proper way to do this downgrade so that I get back the old structure but retain the new content?