I just read through the manual, and it wasn't terribly clear (It's more confusing than it needs to be imo).
I would do what HU says and radius each inside corner the radius of the tool (I'd personally go a very small amount bigger to be safe). I was in a hurry earlier and didn't look close enough at the picture you posted. The machine I use at work doesn't have any problems with 90° inside corners, but apparently Mach2 does. You might want to ask this question on the Mach2 newsgroup (yahoo) as well.
Where did use to create the .dxf? you have some extra lines of code you don't need in there, from a sloppy .dxf. For example,
N34 X0.6396 Y0.8320
N35 X0.6279 Y0.8320
N36 X0.6162 Y0.8320
N37 X0.5498 Y0.8320
The middle 2 lines can be removed and you'll get the same results.
You might want to look at Outline Art from here:
http://www.freefirestudio.com/
I've had pretty good results from the demo.
Gerry