Hello,
I had the same problem and I fixed it by changing
the line that reads:
RewriteRule . /index.php
to read:
RewriteRule .+ /index.php
My regex is a little rusty, but that seemed to do the trick for me.
@matt: The reason the subdirectory is effected by the .htaccess in the wordpress directory is that every subdirectory inherits its parent’s .htaccess
