Drupal 7, Dev Site, will not Aggregate Javascript or CSS
This could really be a myriad of problems.  More than likely, your files directory isn't writable.  Browse to the Status Report (admin/reports/status) and make sure the File System section says Writable.  While you are at it, make sure everything on the report is green.

Running a second Drupal site in a subdirectory of the first site is a tricky situation.  The main concern is the way Apache handles .htaccess files in a directory tree.  htaccess rules apply to the directory that the file is in, plus all subdirectories.  This means that your site in /drupaldev is going to inherit the directives from the root htaccess file.  This may or may not cause problems, but in general, this is a big red-flag.