WordPress uses .htaccess files to process its permalinks structure, but Lighttpd won't obey .htaccess files (yet). So, instead of banging your head against the wall, just use something like the following:
server.error-handler-404 = "/index.php?error=404"
For example, the virtual host for this very website is:
$HTTP["host"] =~ "rackerhacker\\.com" {
server.document-root = basedir+"rackerhacker.com/"
server.error-handler-404 = "/index.php?error=404"
}
Thanks a lot! I have been looking a way to make it work, but non of the ways worked.