When I set up my site with wordpress 2.5, everything looked great initially. I chose to set up my permalinks to a format having domain followed by %postname%. That used to be my previous format in the old blog as well. Default format of permalinks is domain followed by post ids. Later on I realized that none of the links to the posts were working on my site. All those links were pointing to File Not Found error! Did a bit of search on net and figured out that a tweak is a must to get this going. This is what I did to make the links work
1. WordPress 2.5 expects /index.php/ in the url to display the posts appropriately if the permalink structure is other than default format.
2. So, when you configure your permalink format, ensure you include /index.php/ after the directory where your wordpress is installed. To give an example, if you want to set up permalink with your post name, then make sure your format is similar to /index.php/%postname/
3. This applies to any other format apart from numerical values.
However, I am yet to figure out how to make the pages link to work with the new 2.5 wordpress. Appreciate if any of you could share a solution for this.