LocalHost: Permalink question

I’m learning to tinker with wordpress on my localserver.

As I go through the process of changing the kind of permalinks I want, I set it to just the post title with the /%postname%/.

When this happens, none of my posts are accessible. They call come up 404. And this happens an all of the permalink options in the control pannel EXCEPT the default.

Does anyone have any tips? As for now as I build this thing from scratch (based on a tutorial by killersites.com) my code as it relates to the permalink stuff and created a customized 404 notice that runs on the php server looks like this:

<?php if ( have_posts() ) : ?>

<?php while (have_posts()) : the_post(); ?>
<div class=”post”>
<h1>
“>
<?php the_title(); ?>

</h1>
<h2><?php the_author(); ?></h2>
<p>
<?php the_content(‘Read More…’); ?>
</p>
</div>
<?php endwhile;?>

<?php
else:
?>
<h2>Not Found</h2>
<p>
Sorry! I can’t find what you’re looking for
</p>

<?php
endif;
?>
</div>
</div>

Is the code wrong some how?

To quick summarize the issue:

Can’t change the style of permalink (when I do it comes up 404 when I click on the post). So a post titled New Post should come up *localhost/trainermade/new-post* but it comes up a plain 404.

Can’t set the 404 error for a missing link such as (localhost/trainermade/asdlkjasl;dkjas;fdkj)