I'm using xampp and trying to run wp 2.3 locally but there seems to be a problem with the custom permalinks in the following format:
I installed wp2.3 fresh and then imported a database backup of my website using phpmyadmin. All went ok, just changed the home_url (or whatever they were) options in the database to localhost instead of my domain.
And then if I use the default permalinks (e.g. ?p=xx) it works ok for displaying posts and categories, but not pages. If I apply the new custom permalinks it gives a 404 Object not found! error everywhere (pages/posts/cats). I believe it tries to look for a directory e.g http://localhost/wordpress/category1/post1/ when in fact that directory does not exist on my local computer and neither should it. It should recognize the urls automatically, doesn't it?