Looks like the permalinks aren't working yet because your .htaccess file is not writable. Here's what you can do:
In a text editor, open a new file and paste the following text into it:
Code:
# BEGIN WordPress
<IfModule mod_rewrite.c>
RewriteEngine On
RewriteBase /
RewriteCond %{REQUEST_FILENAME} !-f
RewriteCond %{REQUEST_FILENAME} !-d
RewriteRule . /index.php [L]
</IfModule>
# END WordPress
Save the file as .htaccess (note the dot at the beginning), and upload it to the root directory of your WordPress installation on your web hosting account, should be something like /public_html/your-domain.com/
(May look different on your web hosting account)
Note: This file goes into the root directory of your WordPress installation, not into the Atahualpa theme directory.
You know that you're in the WordPress root directory when you see files such as wp-app.php, wp-atom.php, wp-blog-header.php etc... Upload the .htaccess file into the same directory where these files are.