.htaccess not working

[Mami Design]

I have almost finished my site and I have some problems that I would like to address step by step. First is URL rewriting. First of all - I went through all possible solutions on this forum and could not find solution. My server intel is stated below.

 

Server Information

Prestashop version: 1.4.7.0

Server software version: Apache

PHP version: 5.3.8

MySQL version: 5.1.61-log

 

My site states that:" .htaccess file up-to-date", but I cannot find .htaccess file anywhere (also within hidden files). When I create empty .htaccess file and load it to root (and change permission), I get 404 error to my main site although back end is working.

 

My page is http://propilates.si/ (based on Prestashopic template), however this is merely test server for my store, so don't mind some mess.

 

At this point I disabled Friendly URL...

 

I hope this provides enough data to check upon.

 

Many tnx in advance!