RoR app - Passenger and Apache issues

Gems installed
---------------------------
*** LOCAL GEMS ***
actionmailer (2.3.5)
actionpack (2.3.5)
activerecord (2.3.5)
activeresource (2.3.5)
activesupport (2.3.5)
bundler (1.2.3)
daemon_controller (1.1.1)
declarative_authorization (0.5.6, 0.5.1)
fastthread (1.0.7)
fattr (2.2.1)
i18n (0.4.2)
mysql (2.9.0, 2.8.1)
passenger (3.0.19)
rack (1.0.1)
rails (2.3.5)
rake (0.8.7)
rush (0.6.8)
session (3.1.0)


Gemfile
---------------------------
source :rubygems
gem 'rails','2.3.5'
gem 'i18n','0.4.2'
gem 'declarative_authorization','0.5.1'
gem 'mysql','2.8.1'
gem 'rake','0.8.7'
gem 'rush','0.6.8'


config/environment.rb
---------------------------
require File.join(File.dirname(__FILE__), 'boot')
RAILS_GEM_VERSION = '2.3.5' unless defined? RAILS_GEM_VERSION
#I have removed some blank lines..so the line number shown on the error trace (5) now becomes the following....
Rails::Initializer.run do |config|
  config.time_zone = 'UTC'
  config.gem 'declarative_authorization', :source => 'http://gemcutter.org'

  config.load_once_paths += %W( #{RAILS_ROOT}/lib )
  config.load_paths += Dir["#{RAILS_ROOT}/app/models/*"].find_all { |f| File.stat(f).directory? }

  config.reload_plugins = true if RAILS_ENV =="development"
  config.plugins = [:paperclip,:all]

end