CodeIgniter 2.0 - you can longer name a controller 'system' out of the box.

[eluser]WanWizard[/eluser]
If your .htaccess contains a rewriterule using -d (test if directory exists), you can not have a first URI segment that is equal to a folder in your document root. That is not limited to system, but also applies to application, assets, files, and whatever you might have there.

Solution is to dump your -f and -d rewrite rules, and only exclude from rewriting what you don't want to rewrite.

Also, as of CI 2.0 your system folder contains a .htaccess as well with a deny all. If that is processed first (which now that I think of it is quite likely), access is denied before it ever gets to your rewrite rules...