WordPress 2.6 was recently release, and I jumped right in. I didn’t back up my files (bad practice!) and after the updated files had been loaded and the upgrade.PHP file run, only my admin panel and home page worked. Category, tag, and individual pages did not work, rather, they returned either a whole bunch of “cannot load” php errors, or a simple “not found” when I loaded up the default theme.
The problem does not appear to exist as much in the Apache world as it does in the IIS world (due to Apache supporting mod_rewrite and IIS not). This is a known bug and will be fixed in WordPress 2.6.1.
You can get around the problem by going into the administration panel, then Settings, and Permalinks and making sure the Category Base and Tag Base values are NOT BLANK! You can use “category” and “tag” if you’d like.
Once you do that and Save Changes you should be good to go! (Note: WordPress will automagically add a preceding slash to your values, so just put in the words, no slashes or “” marks)