@ Firecorp – Try these 3 things below and let me know if they work.
Some Web Hosts do not allow you to use the “Options” Directive in .htaccess files.
http://forum.ait-pro.com/forums/topic/read-me-first-free/#internal-server-error
500 Internal Server Error After Adding New custom .htaccess Code To BPS Custom Code
http://forum.ait-pro.com/forums/topic/read-me-first-free/#500-error-custom-code
Your Host does not allow locking the root .htaccess file. Change the root .htaccess file permissions to 644
http://forum.ait-pro.com/forums/topic/read-me-first-free/#root-htaccess-file-lock