Permalinks can be quite a bit of trouble sometimes. First, check that permalinks when set to Post Name work on other pages. So just view any other page on your site and affirm that you can visit it.
Second, in your Theme Options>Portfolio, try changing the name where it says “Enter a page slug that should be used for your portfolio single items” to something like “my-portfolio-items” without the quotation marks. One of the requirements of this field is that it can not share the same slug (what you see in the URL for pages) as ANY other page on the site.