Editing permalink settings seem to work normally according to wordpress, however in WP root folder .htaccess is not being created nor edited if I create and chmod it to 666.
If I edit my settings to /index.php/blog/%postname% everything seem to work ok, but if I want it to be /blog/%postname% I get a server 404 msg for everything except home page (not even using 404 template, which is used normally otherwise).
In any case I get a message saying "Permalink structure updated.", which should mean .htaccess is editable.
I'm losing my mind here, any help would be greatly appreciated.