I have one Wordpress installation at www.website.com, and a test site at www.website.com/test.
The standard site works fine, but the links on my test site act weird. I use post title as permalink (www.website.com/test/example-post) , and the links look right when I click on them, but they will send me to the standard site (in root folder). So if I have a page with the same title there, I will end up there. If the standard site doesn't have that page title, I will get a 404 there.
Also, the site title won't work, only the post titles (like, the browser title would be __ :blog entry name).
I tried changing htaccess to the folder name of the test site (/test), but that screwed up the standard site (links there took me to the test site, which is not 'open' yet).