Thanks. Here are answers to your questions:
First, I’m on Windows 7.
Second, here’s my .htaccess file
# BEGIN WordPress
<IfModule mod_rewrite.c>
RewriteEngine On
RewriteBase /blog/
RewriteRule ^index\.php$ - [L]
RewriteCond %{REQUEST_FILENAME} !-f
RewriteCond %{REQUEST_FILENAME} !-d
RewriteRule . /blog/index.php [L]
</IfModule>
# END WordPress
(I assume the wp root folder (blog) is writable. I can edit, copy, and delete files contained under .\blog.)
Finally, on the WP Permalinks Editing page, there is no message at the bottom saying that my .htaccess file is not writable.
Hope this helps,
Michael