Ok, this happens because you set the option "Create a security tightening .htaccess" to Yes. Please disable it and try again. By the way, you can regain access to your site by simply renaming the .htaccess file to something else, so it won't be loaded.
Since .htaccess directives are very dependent to the server, I suggest you to use default Joomla .htaccess file, then when you move to the live server you can use Admin Tools Htaccess Maker.
Davide Tampellini
Developer and Support Staff
🇮🇹Italian: native 🇬🇧English: good • 🕐 My time zone is Europe / Rome (UTC +1)
Please keep in mind my timezone and cultural differences when reading my replies. Thank you!