Hello,
as far as i know the only affect of modrewrite is the a page is reachable also if you typ a url without the pages dir, but the physical place of the page stays always in the pages dir. So get rit of the pages dir can only be solved with the changes in the advanced settings of Wb.
One feature of WB 2.7 will (i hope) be the fact that WB 2.7 uses htaccess and modrewrite for the pagename generation so the pages dir isn't needed longer. Ryan has developped a first version of this code wich already works as long as you only use normal pages, but the code has problems with some modules wich also needs the pages dir.
Matthias