If you are using a Windows based hosting, or if your permalinks have “index.php” in their custom URL, then your Permalinks [such as posts or pages] will not load properly when using WordPress 2.6.
Fortunately there is a fix for this.

If you need/want the index.php to be there, then on the Settings->Permalinks screen, add some values in for the category and tag bases. The words “category” and “tag” will do just fine. As long as they are not blank, this should work around the bug.

As mentioned in the thread FIX: 2.6 Permalink issues with ‘index.php’ on the WordPress.org Support Forums.
Hope it helps someone out there.