Pretty URL's

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I am having a headache with this! I have tried disabling them in the dashboard, flushing the cache, modifying the .htaccess file with little luck.

After installing an addon domain, I was finally able to get the site to pull up properly using an .htaccess files of:

====================================
# Use PHP5 as default
AddHandler application/x-httpd-php5 .php
<IfModule mod_rewrite.c>
RewriteEngine On
RewriteBase /newsitefolder/

RewriteCond %{REQUEST_FILENAME} !-f
RewriteCond %{REQUEST_FILENAME} !-d

RewriteRule ^newsitefolder/(.*)$ index.php/$1 [L]
</IfModule>
====================================

HOWEVER, when I login to edit a page, the dashboard displays fine. All dashboard options appear fine. When I click the "Return to Website" button, I get the page with the C5 toobar at the top. All during this time, the URL for the site is displayed properly. When I click "Edit page", the URL changes to display the host URL
http://www.host-site.com/newsitefolder/index.php?cID=1...
instead ofhttp://www.newsitefolder.net/

Am I missing something here? I suspect it is something in the .htaccess file, but with the URL changing mid-stream, I'm suspecting something in C5 (which if this were happening with other, there would be more posts on this subject).

Any help will be greatly appreciated. I need to know where to start!

lab3