I put that in which you said into my .htaccess file, then previewed my index.php page and it says internal server 500 and my apache error log says:
[Sat Jun 20 11:32:15 2009] [alert] [client 127.0.0.1] C:/wamp/www/mylocalsite/.htaccess: <Directory not allowed here
I made sure the .htaccess in my my main directory in c:/wamp/www/mylocalsite/
I also double checked again my httpd.conf file to make sure # is removed from line
LoadModule rewrite_module modules/mod_rewrite.so
and it was.
Am I overlooking something else?