Wordpress permission denied to /blog/ folder

Good evening,

The web site I am working on is here:

http://www.mallacootahoney.com

I have a Debian Squeeze 6 LAMP install.

I am using the latest version of WP.

My VPS had a problem, so I transferred all my WP sites from their live sites to a local install on my laptop. I did this by saving wp-contents and sql backup, etc. After fixing my VPS and rebooting, I am starting to upload or put back all live sites.

I started with one - the site above.

I installed a fresh WP, then transferred wp-content back and imported the sql file. ALl went well, except for a little permalink problem which I ironed out with the Override All setting my sites-available default and default-ssl files. Then activated a2enmode rewrite on the server (i have apache2).

Ok, everything worked wonderfully, except when I try to access the blog page on http://www.mallacootahoney.com

My wp installation is at http://www.mallacootahoney.com/blog and I changed the www link to be http://www.mallacootahoney.com inside WP settings. I transferred the index.php out of blog/ and into the root. So far so good.

In my .htaccess file in the root is only the permalink info. NOthing else.

I have been reading every post on this support forum and also off site courtesy of google. anything that brings up a hint of info about why /blog is being blocked.

I added to my mallacootahoney.com file on apache under the sites-available directory the following code:

Options FollowSymLinks

AllowOverride All

THis is within the Virtual Host comments. When I dont have this code you are able to access blog/ but you can see the entire wp installation directory, which isn't good. When I have the above code, permission is forbidden.

Now when I go into the dashboard and to the page edit of the actual page called blog with the slug also called blog, so it looks like http://www.mallacootahoney.com/blog, and I change the slug name from blog to news, for example, and save it, then the blog shows up as per normal and I can visit all blog posts.

As an aside, in the settings in WP, the Blog page is set as the page where all posts show up.

I understand that somehow there is a conflict between blog/ being recognised as both the WP installation directory and also the location of the web sites posts, so the actual blog. I know that I can solve this problem easily by changing the slug to anything other than blog.

But I would like to know, before using this option, is there another option and what am I missing here. I would really appreciate help and asisstance, as I have spent days trying to fix this problem and I am a little at the end of my abilities here.

Thank you in advance to anyone who can help me and shed light.

Greetings,

Jasmin