So, you install CiBonfire under a subdirectory called "starter". This is what I did (XAMPP + bonfire v0.7):
[1] Browse to starter/index.php, prepend "/starter" to URL in line #2 as shown below
$install_url = 'http'.((empty($_SERVER['HTTPS']) or $_SERVER['HTTPS'] == 'off')?'':'s') .'://'. $_SERVER['SERVER_NAME'] .'/starter/public/';
You can then proceed with the installation.
[2] Change 1.htaccess in ci-bonfire/public/ to .htaccess, then update line #158, change to your subdirectory name
<IfModule mod_rewrite.c>
Options +FollowSymlinks
RewriteEngine On
RewriteBase /starter
RewriteCond %{REQUEST_URI} ^bonfire/codeigniter.*
RewriteRule ^(.*)$ /index.php?/$1 [L]
</IfModule>