.htaccess RewriteCond working badly

I am using an Apache server and a .htaccess file with these lines:

<Files *.inc>
Deny from all
</Files>
RewriteEngine On
RewriteBase /mysite/
RewriteCond %{REQUEST_FILENAME}!-f
RewriteRule ^(.*)$ handle_requests.php [L]

When I try to navigate to the address [my.server.com...] based on the rewrite rules it should call handle_requests.php to handle the request, because there isnt any "index" file. This is very strange... I am suspicious that it has something with an existing file "index.inc".

error.log:
[Sat Nov 18 21:07:25 2006] [error] [client 192.168.1.128] client denied by server configuration: /www/default/public_html/mysite/index.inc

[Sat Nov 18 21:07:25 2006] [error] [client 192.168.1.128] Negotiation: discovered file(s) matching request: /www/default/public_html/mysite/index (None could be negotiated).

Can someone advise me a solution?

Thanks.

My server: Apache/2.0.54 (Debian GNU/Linux) PHP/5.2.0-0.dotdeb.3 with Suhosin-Patch Server at my.server.com Port 80

PS. The "my.server.com" and "/mysite/" are just imaginative. The originals match accurately their format.