Even after creating a new .htaccess file, permalinks are causing issues. There must be some odd setting server-side.
I checked the .htaccess file contents after a new one was created, there were differences between yours and mine, on the 4th and 7th lines:
# BEGIN WordPress
<IfModule mod_rewrite.c>
RewriteEngine On
RewriteBase /wordpress/
RewriteCond %{REQUEST_FILENAME} !-f
RewriteCond %{REQUEST_FILENAME} !-d
RewriteRule . /wordpress/index.php [L]
</IfModule>
# END WordPress