We installed a WP blog on an existing site - similar to many I've done: GoDaddy hosting, Linux Apache server, WP 3.5.1. The blog is in a subdirectory "www.mysite.com/blog".
My original .htaccess file is:
# 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
When I log in to admin and simply click on the "Permalinks" link in the left sidebar (without changing anything) the .htaccess file is rewritten to this (took some trial & error to determine this):
# BEGIN WordPress
# END WordPress
After this, trying to access the blog ("www.mysite.com/blog") results in the chrome message "This webpage has a redirect loop". Also when I try to log in using "www.mysite.com/blog/wp-login.php" it does not accept my login but issues no error.
Once I restore the .htaccess file back to its original state, everything runs fine. Though, unfortunately, I obviously cannot change Permalinks settings with this situation :P
Tried to recreate this problem on another site I just installed (also 3.5.1) and the problem did not occur.