Tonight I updated Wordpress from Wordpress 2.0.2 to WordPress 2.5 and ran into some issues with permanlinks. Turns out that Yahoo! Web Hosting does not allow you to do Permalinks the standard way with WordPress and you have to use the Yahoo! Plugin for this.
Essentially what happened was that standard permalinks in WordPress go 404 and Yahoo! Permalinks Plugin continuously re-directs with the following error "The page isn't redirecting properly."
So, here is what I did to get Permalinks working:
1. Active the Yahoo! Permalink Plugin
2. Download the Disable Canonical Redirects Plugin. (which i probably should have had installed a while ago)
3. Upload the file to your wp-content/plugins folder
4. Activate the Plugin from your Plugins Menu
5. Customize your Permalinks!
Done, done and done! All my permalinks issues were resolved! Just a reminder, this is a Yahoo! Web Hosting issue and not a WordPress 2.5 issue.