Subpages problem after installing through FTP

Yes, but only if using the Panel. The core works beautifully without rewriting.

Yes, that’s intentional. I tried deleting the .htaccess in a test installation and set the rewrite option to false. The /index.php/projects URL works just fine, as Apache passes any additional path info after an existing file to that file. Doesn’t it work for you? If so, what server does your hoster use?