As I mentioned previously, I want to use permalinks to remove index.php from my URLs, and needed to update the .htaccess file in the root of my blog folder to do so. The site I did this for; TopCommentator.com, is hosted on a linux server so the .htaccess file should reside in the /webspace/httpdocs folder.
When I installed WordPress (version 2.7.1), there was no .htaccess file as part of the installation so I got the following warning/error messages when I tried to update your permalinks structure in the WordPress dashboard under Settings >> Permalinks (at the bottom left of your WP dashboard):
If your .htaccess file were writable, we could do this automatically, but it isn’t so these are the mod_rewrite rules you should have in your .htaccess file. Click in the field and press CTRL + a to select all.
What you'll be selecting is the following code which is placed below the message at the bottom of the page:
# BEGIN WordPress
RewriteEngine On
RewriteBase /
RewriteCond %{REQUEST_FILENAME} !-f
RewriteCond %{REQUEST_FILENAME} !-d
RewriteRule . /index.php [L]
# END WordPress
Copy the code into a text editor (I used notepad) and save the file as a.htaccess. Upload a.htaccess to your server, (I use FileZilla ftp client). If you cannot see the .htacces file from within your web space file manager or ftp client, you'll need to make sure that you have selected the show hidden files option (for FileZilla go to : Server >> Force Showing Hidden Files). Rename a.htaccess to .htaccess and change the file permissions so that the file is writable. To do this in FileZilla, right click on the .htaccess file and select File Permissions.... I chose to set the file permissions as chmod 664 (see screenshot below):

Initially when I uploaded the file and changed the permissions as above I still received the error message saying that .htaccess was not writable. I had followed the instructions and was not sure what was wrong. I called my hosting account's support number and many thanks to Jonathan who was able to tell me that I needed to remove some extra characters (  )added to the start of the file (see how this looked below):
# BEGIN WordPress
RewriteEngine On
RewriteBase /
RewriteCond %{REQUEST_FILENAME} !-f
RewriteCond %{REQUEST_FILENAME} !-d
RewriteRule . /index.php [L]
# END WordPress
This happened after copy/pasting the code from the WP dashboard and saving it as a notepad file. The extra characters cannot be seen when opening the file in notepad and Jonathon recommended using notepad2 to view files that I'm uploading to my Linux hosting account (so i'll be doing this form now on). When I removed the characters from the start of the file everything worked fine and I got the nice clean permalinks that I wanted. I use /%postname%/ only in the custom permalink structure as this is what I wanted (see below):

So now instead of http://www.topcommentator.com/index.php/about/ appearing in the browser address bar I now have the clean permalink with index.php removed that I wanted: http://www.topcommentator.com/about/. Something I could not find when trying to solve this problem (although it probably exists somewhere) was a working version of the .htaccess file with the correct permissions set. If you like download an exact copy of my sample .htaccess file here, unzip and upload to your web space and hopefully this works for you to. If your blog resides in a sub folder under your root domain eg. blog, you'll need to place the .htaccess file in folder and update the file to include the sub folder name as below:
# BEGIN WordPress
RewriteEngine On
RewriteBase /blog/
RewriteCond %{REQUEST_FILENAME} !-f
RewriteCond %{REQUEST_FILENAME} !-d
RewriteRule . /blog/index.php [L]
# END WordPress
Hopefully someone gets some value out of this in the future as it took me a while to sort it out