No surprise, it’s a mod_rewrite issue. I removed the rewrite info for G2 from htaccess and got WordPress working again. Gallery2 works properly as well so not sure the relevance of what I deleted.
However, WP-G2 can’t find my images. I deactivated mod_rewrite in Gallery2 and WP-G2 works properly in WP 2.0.
To note: WordPress 1.5 and WP-G2 worked fine.
I’m looking forward to resolution to the mod_rewrite conflicts.