Exact same problem as described.
I did a clean 1.2.3 install running on WordPress MU 2.9.2. I followed the how-to as presented on this page, and changed the permalinks setting to something other than default.
A .htaccess file is indeed created, and the buddypress installation does run. However, when I try to visit the about page or the members page, I get a 404 error stating the page doesn’t exist. The link is correct (http://localhost.localdomain/wpmu/members/ i.e.) , but it simply doesn’t show anything.
I can’t visit a members profile either, it simply stops everywhere outside the mainpage.
I’m using the default Buddypress theme btw, nothing changed on my side.