Yes, that's the problem. However, in the directory in question there are a series of mp3 files (podcasts) which I would like people to have free access to without them defaulting to an 'index' file when they attempt to access that directory.
In which case, yes, the default Drupal .htaccess is causing that. You'll want to add a new .htaccess in the podcasts directory with simply:
Options +Indexes
This will revert the "Options -Indexes" in the parent directory (ie., Drupal's .htaccess) and should do what you want.