I have two sites that this is happening on, and two that it isn't. I've been trying to track down exactly what's causing it, but haven't had much luck.
Your method sort of fixes the problem. If you change the "File Suffix" from '.html' to '/' in the configuration panel, links like "site.com/news/" will work. However, links generated with two "directories", such as "site.com/news/article/" will give you a 404 error.
This is a very odd bug. On the two sites it's happened on to me, they both worked fine at first. Then a few days later on one, and a week or so later on the other, they both started redirecting to the front page without any changes having been made to the site. Hopefully the other two that I have working won't eventually have problems with this.