Thank you I finally solved the problem after about 3 hours of research. I even blogged about it Here
Thanks for your response.
I use the nginx web server so I don’t know if I would need the .htacess file.
When I changed permalinks, the above .htacess file wasn’t created. I created one myself but still no difference.
I also used http://winginx.com/htaccess to convert the above .htacess file to my nginx.conf but It causes the whole site to be inaccessible giving me a [403 Forbidden]
No the Change permalinks button works fine. I get a 500 when I change the permalink to Post Name like this (Screenshot). And I am using the default plugins and theme. You can check out my site at http://najela.cf/wp/
Thanks.