The reason I say to rename the file on the server is because Windows does not like files that start with a .
Well it's "Windows Explorer" that doesn't like to save the file.
You can use notepad as well or DOS to save it on Windows system. Just in the save as from NOTEPAD use quotes around it when you save it ".htaccess" and it will be saved correctly. Make sure you FTP it up in ASCII mode as well.
.
