What about when the blog is hosted at wordpress.com and not self-hosted. How do you go about making the change then?
That’s not an option, but I did find a solution to my particular problem. I went to Permalinks under “Settings, Permalinks” and selected “Custom Structure” and inserted ‘/%postname%/’ and everything started to work.
I too have found exactly the same issue. I thought I was going mad, but it seems like we have either done the same thing wrong, or there is an error in the theme. Interesting. Perhaps the designer could help us?