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After much research, I found the solution:
sudo vi /etc/httpd/conf/httpd.conf/AllowOverride<Directory "/var/www/domain.com/public_html">
AllowOverride All
</Directory>
Thank you @CrypticDesigns for helping out too! Much appreciated.
Oh…I thought you did this already in the first post of your question. My bad, could have told you this earlier. Anayway good you got it solved, if you have any more questions you can come here again.
Allright looks good to me, what you could try is to delete this .htaccess , then create a new one , keep it empty , chown it to your webserver and chmod it to 664. Then in wordpress try to switch the permsalink option twice, and check the content of .htaccesss. Then if the content automatically created looks good, restart apache.