Unable to Migrate Permalinks from Default to anything else

Symptoms:

• site remains operational
• clicking on links to pages or post only refreshes to home page
• 404 errors not encountered or any other server errors
• After making a setting change, dashboard reports that “Permalink Structure Updated”

Environment:

• mod_rewrite verified and working
• WordPress 3.3.2.
• php 5.2.17
• mysql 5.1.61
• .htaccess has rights of 0644

Here contents of my /public_html/.htaccess my .htaccess:

# Use PHP5 Single php.ini as default
AddHandler application/x-httpd-php5s .php

# For security reasons, Option followsymlinks cannot be overridden.
#Options +Followsymlinks
Options +SymLinksIfOwnerMatch

# BEGIN WordPress
<IfModule mod_rewrite.c>
RewriteEngine On
RewriteBase /
RewriteRule ^index\.php$ - [L]
RewriteCond %{REQUEST_FILENAME} !-f
RewriteCond %{REQUEST_FILENAME} !-d
RewriteRule . /index.php [L]
</IfModule>

# END WordPress

RewriteEngine On
RewriteRule ^link([^/]*).html$ rewrite.php?link=$1 [L]