Thank you for the replies.
Yes I am aware it is a hidden file. I have been using it for years to redirect bad url's reported from Google Webmaster tools.
I guess I assumed the root .htaccess would not work the same way with the sub-domain since the only way I could get it to work was by putting only the prettylink portion such as this
'Redirect 301 /category/statistics http://www.mydomain.com/market-statistics'
If I were to put the http://mydomain on the source URL it would not work. So since getting the advice that there is only the one htaccess I tested it the same as the example above, and it works.
But my next question is this; if for some reason a bot or user went to a permalink like http://mydomain2.com/category/statistics which would be a different site on my multi-site installation then they would be redirected to the wrong site. I also double checked, and on a redirect 301 I can not put the domain for the source URL it has to only be the prettylink portion.
Hope this is clear enough to get the help I am looking for, just trying to give all the info I can.