Lol...spent hours trying to figure it out. Posted here, and sorted it out 10 minutes later. This is the answer to my problem:
The line just below this section: 'Options FollowSymLinks' may cause problems
# with some server configurations. It is required for use of mod_rewrite, but may already
# be set by your server administrator in a way that dissallows changing it in
# your .htaccess file. If using it causes your server to error out, comment it out (add # to
# beginning of line), reload your site in your browser and test your sef url's. If they work,
# it has been set by your server administrator and you do not need it set here.
It was in the Joomsef manual...I just didn't know what I was doing. But, that worked great!