WP 2.0 has a bug regarding Pages (not Posts) when permalinks are turned on.
Prior to WP 2.0 - and in WP 2.0 according to wp_list_pages() - permalink Page URLs always look like this (it doesn't matter what permalink format you select):
and so on.
Parent pages and Child 1 pages come up fine, but Child 2 and deeper pages return the 404 error page.
This bug was also documented in these forums here, but that post has multiple topics and the bug may not have surfaced there.
Is the development team aware of this bug?