Are the categories to show selected (coloured) in edit block properties? Are the permissions to view of the categories set for the user groups? (Already tried to update the News module in module manager?)
The .htaccess contains three instructions. A lot of people have not permission to modify these settings on their server. Remove one by one on turn the line to find out which is the problem and leave only the other instructions.
You can assign the ports of ISS to eg 8080, so 80 would be free to use by Apache. As you may have read in the XAMPP docs, it is dedicated for testing and is not secure to use on the internet with its default settings.