Permalinks Broken

I am running WP 2.9.2 locally with XAMPP so unfortunately I do not have a live working version for you to view.

When the sites links are set to Default, all links and nav working as expected. When I update to custom permalinks: /%category%/%postname%/ I can access the main page but any link/category/post header I choose is broken. If I switch back to default, the links work again.

When I update the permalinks the message at the top of the Dashboard states that the permalinks were updated successfully.

I have read other, similar topics that suggested adding this:

# BEGIN WordPress

<IfModule mod_rewrite.c>
ErrorDocument 404 /index.php?error=404
RewriteEngine On
RewriteBase /
RewriteCond %{REQUEST_FILENAME} !-f
RewriteCond %{REQUEST_FILENAME} !-d
RewriteRule . /index.php [L]
</IfModule>

# END WordPress

…to my .htaccess. I attempted this and the issue still persists.

Any ideas/suggestions would be much appreciated. If additional information is needed, say the word and I’ll get it right away.

Thanks in advance.