And yes, if you think this makes me sound like a newbie, I am. However, it would have helped if this had been available here rather than having to go hunt for it. Helpful tips & hints always make things go smoother. :) So why not? ... I found an answer that some may be looking for.
Unfortunately, my day job has me working with Microsoft systems (the "so called" Dark Side ;), so my Linux experience is limited at the moment.
Also had an issue with AllowOverride not allowed. Tracked this one down again to the fact that httpd.conf is no longer used. Check into a file in the folder /etc/apache2/sites-enabled (for me it was) 000-default which had the AllowOverride defined in it. Changed 'none' to 'all' & success! Finally!
I'm loving the experience although it is a bit frustrating finding some of these things out. :)
BTW: the filename 000-default is zero zero zero dash (or hyphen) default.
With a default install of ubuntu and apache2 installing php5-gd and enabling mod_rewrite isn't enough to get it going. Setting AllowOverride to "All" for the "/var/www/" directory is the required step to get rewriting to work.