wordpress permalink errors

so I have been dealing with this issue for almost 2 weeks now and can not find 1 solution.

So I have a site that is running on a custom theme i designed with wordpress.www.blokmovaz.com

I am trying to use a plugin that requires me to change the permalinks to anything but the default…

When I change the permalinks it updates but then my whole site falls apart. The home page is fine but when I try to click on another link or page it just goes to a "Not Found" url.

Also I just updated to wordpress 3.0.1 and I noticed that my permalinks now has a "/blog" infront of the Custom Structure. Please see http://blokmovaz.com/perma.png for a image of that Im talking about.

After trying everyway possible to fix it with an error occurring on wordpress i have no other way to think then its a server issue…. My content is located in a csv folder…

is this server related?