WordPress One Minute Podcast Ep8: Pretty Permalinks
Yesterday I talked about checking out your cpanel’s file manager, so today is part two getting some pretty permalinks. The key here is editing your .htaccess file. If you don’t edit your htaccess after you switch the permalinks, your blog will get pretty wonky.
By the way, if you can now subscribe to this podcast on iTunes or just regular RSS.

Sounds like another file permissions problem
WordPress normally can change the .htaccess file itself, so the user doesn't need to edit it. If it can't write to the file for some reason, it'll ask the user to edit it.