If you enable "pretty" permalinks in WordPress, you also have to put a .htaccess file in place in the wordpress folder for these SEO friendly URLs to work correctly.

If your wordpress blog is installed in the "blog" sub-directory for example, the .htaccess file would contain:

# BEGIN WordPress
<IfModule mod_rewrite.c>
RewriteEngine On
RewriteBase /blog/
RewriteCond %{REQUEST_FILENAME} !-f
RewriteCond %{REQUEST_FILENAME} !-d
RewriteRule . /blog/index.php [L]
</IfModule>
# END WordPress