Permalink structure in Multi sites

I did make a bad question at the forum, sorry for that, before you ignore this to be a repost, let me clear up the statements.

I had a physical directory http://www.xyz.com/phy-dir/

inside that i had multisites..

http://www.xyz.com/phy-dir/ms1
http://www.xyz.com/phy-dir/ms2

Now i used the plugins mentioned here

then the permalinks got changed for http://www.xyz.com/phy-dir/ms1

from

http://www.xyz.com/phy-dir/ms1/blog/postname
to
http://www.xyz.com/phy-dir/ms1/postname

but the plugin did not make any changes in the physical directory.

ie:

http://www.xyz.com/phy-dir/blog/postname remains the same

Can you help me with this ?

This is the answer given by the Support guy .. so do multi sites get us into these kind of troubles?

Alex Y.:The username and password for the database user that was connecting to that database was incorrect, so I created a new user and added it to the database. If these credentials are incorrect, there will be a connection error. I am not sure how they were changed, it may be due to a bug with WordPress or a script that changed them.
(5:38:43pm)ME:i Installed subdirectories and Multisites, can they be responsible for this?
(5:40:08pm)Alex Y.:Possibly, but I am not able to say for sure. I have heard of Multisites doing that before, but I have not heard of subdirectories.