Sorry the title should be Problems running Wordpress as a backup on Xammp - but i couldnt figure out how to edit that!

Hi - I have to do a bit of troubleshooting on a Wordopress site offline on my xammp inatallation so i found some articles on how to back up Wordpress files and database and install them on the local machine so i can do the editing from there.
These are the steps i took.

1.I downloaded all the files from the site via ftp.
2. Backed up the database via phpmyadmin.
3. Created a new directory for the site in the localhost xammp
4. Created a new database in xammp phpmyadmin with the same name.
5. added the user with all privalages as in the wp-config file
6. Changed all istances of the live url in the sql backup to the local one - so http://www.mydomain.com - to http://localhost/domainname
7. Imported the changed sql file into phpmyadmin in xammp

so from there the front page works ok - but a lot of the images seem to be missing. Does anyone know why this would be?
Also, if i try and put cusom permalinks %postname% - it takes me back to the xammp main page - i guess this is something to do with how xammp handles apache mod rewrite or .htaccess but im not sure why - could anyone be kind enough to shed some light on this please?
Thanks

I think those are specific to templates and it doesnt get backup