Sara,
Sorry for the confusion. Files on web servers have permissions set on them so that different users or software can do different things with them. These permissions are represented by numbers.
What can happen sometimes with a WordPress installation is that the .htaccess file can be read by WordPress, but the file permissions do not allow WordPress to write any changes to that file.
What you’ll want to try is using a FTP program, right click on the .htaccess file and see what the permissions are set to. Try making them 755 and then applying the changes.
Try updating your permalinks then and see if it works. If it does, then change the file permissions back to what they were before.
If it doesn’t work, then something else may be happening. If you can send over a link and I’ll see what I can uncover for you.
Let me know if I can help,
Bill