I had this same issue.
I have also had it occur in other circumstances and have always been able to uncomment two lines of code in my functions.php file to get my permalinks rewritten.
//global $wp_rewrite;
//$wp_rewrite->flush_rules();
after these lines get a chance to execute everything is fixed and I can continue on with life.
With this WP 4.2.1 update even these lines of code do nothing to resurrect my site from the
404 page not found
graveyard.
In the end I had to restore backups from before this update and rollback my wordpress install to 4.2.
I wont be doing anymore wordpress updates until I can ensure my site doesn
t break on a localhost install.
Oh Boy…..