This has reared its head again on another install (still within NYU hosting). Tried to fix with htaccess 3.4 like you mentioned and it broke the subdirectory site (was using the correct htaccess code). Tried to revert to 3.5 and site was still broken.
Threw my hands up and deleted the entire WP installation and reinstalled. Now getting this error after installation and can’t get to new install at all:
Internal Server Error
The server encountered an internal error or misconfiguration and was unable to complete your request.
Please contact the server administrator at firstname.lastname@example.org to inform them of the time this error occurred, and the actions you performed just before this error.
More information about this error may be available in the server error log.
Additionally, a 500 Internal Server Error error was encountered while trying to use an ErrorDocument to handle the request.