Find the server, edit the AllowOverride statement. Works like a charm.
Why did I need to do it there? I checked "Python" in the ispconfig page for this site.
Even if you edit this, the next time you save the page in ISPConfig, it will put it back, no matter what is in "Apache Directives".
Once I unchecked "Python", and added this to Apache Directives....
Options +Indexes +FollowSymLinks +MultiViews
allow from all
AddHandler mod_python .py
Everything works now. Python, and AllowOverride.
Unless I missed something, this is a bug.