.htaccess file URL rewrite not working in 1.4 Beta 1.

Question

I am running Apache 2.2 and PHP 5 on Windows Server 2003 R2 with 1.4 Beta 1. I am trying to get the most user and SEO friendly URL option to appear, but it does not.  When I change “AllowOverride None” to “AllowOverride All” in the Apache config file, as per the instructions, I get the error: “Internal Server Error; The server encountered an internal error or misconfiguration and was unable to complete your request.”  I was able to resolve this error by uncommenting out this line from the httpd file:
LoadModule rewrite_module modules/mod_rewrite.so
However, the URL rewrite is still not working after rebooting the server and the top two URL options are not available:
 

Comments

I'm not sure why the .htaccess file is incompatible with your server setup, since I've validated it as containing no errors.

Your Apache error_log file will probably contain a clue, so please check that and post what you find.

---

There is nothing in the error log files except normal activity: Starting the Apache2.2 service
The Apache2.2 service is running.
] Apache/2.2.17 (Win32) configured -- resuming normal operations

Any other ideas?