Why does your site get messed up when you turn on SEF (Search Engine Friendly URLs)?
From Joomla! Documentation
Usually this has something to do with your host's settings. One solution that commonly works is to enter a value for the $live_site variable in the configuration.php file found in the root directory of your Joomla site files. The value of the variable must be manually edited.
Typically, it would look like:
var $live_site = 'http://example.com';
But, if you access your Web site in a folder, it would be like this:
var $live_site = 'http://example.com/joomla';
Note: If the $live_site variable is already set correctly then try
var $live_site = '';
- See Joomla! v 1.5 SEF URLs Scribd by Benjamin Hättasch which contains step-by-step instructions for installing and trouble-shooting your SEF URLs.