No, mod_write works as it’s supposed to. The problem is that after it rewrites the URL, the server config forces a hard redirect.
I was told this is being done because PHP and static content are served from different servers. So if it looks like a static HTML page and then gets rewritten, the server has to do an external redirect to another box. Poor design choice for load balancing (or security for that matter). Hopefully enough people will complain, and they’ll fix it.
Other than that, WP runs fine.