Same problem here.
I Reinstalled WPMU 2.8.4a, (with subdirectories instead of subdomains) and BuddyPress from trunk, because I updated my localhost (WAMP 1.7>2.0).
My old .htaccess (which was working before)
If I use the .htaccess, the wordpress-mu directory under 127.0.0.1/kine disappears and I can’t access WPMU.
If I don’t use it, I can access WPMU & Buddypress, but I get a “404 Not Found” for every page other than home…