Your /etc/users/{username}.conf should look like this:
<Directory "/Users/username/Sites/">
Options Indexes MultiViews FollowSymLinks
AllowOverride All AuthConfig
Order allow,deny
Allow from all
</Directory>
You also have to change the name Apache runs under to be able to save the .htaccess rules and use the media uploader etc…
<IfModule !mpm_netware_module>
<IfModule !mpm_winnt_module>
User chris
Group admin #or you can use staff
</IfModule>
</IfModule>
The AllowOverride is listed a couple of times in httpd.conf make sure you changed the right one or both. One is the default setting and the other is for Library/WebServer/Documents which you should change to whatever server document root your using.
Apache has to be restarted for any changes to take affect. sudo apachectl restart
Also see How to Install Apache and PHP on Mac OSX for more details.