Just change 'permalink' from default to one of other options provided by Atahuapa theme, and got this message:

Forbidden

You don't have permission to access /blog1/ on this server.

Now I can't go back to dashboard to change it. PLEASE HELP!!!

1) it is not an Atahualpa option or issue, it is a WordPress option/issue
2) if you don't know what an .htaccess file is and/or don't know how to use FTP then you should probably contact your host's support group and explain what you did and ask for help.

If you do know what they are, then you might want to look at
http://perishablepress.com/press/200...ss-permalinks/
http://wordpress.org/support/topic/w...ccess-anything

Thank you, JD!