interesting problem that I encountered, not sure if it’s bug or not..
On a clean install using the twentyeleven theme I try changing the Permalink Settings to something different from the Deffault and every post starts giving Page Not Found 404.
The Pagination and the top Nav Menu also stop working.
What needs to be changed for all of this to start working, because the same problem is present when I start creating custom theme?
EDIT: Figured it out! The solution was very simple – turning the rewrite module of WAMP.
Check to make sure your .htaccess file (in the root) is writable by WordPress, if it isn’t then you may need to manually set this up to get the permalinks working correctly.