Mmmm... I think that this might be the problem. Thought not quite because of the reason you suggested. My wwwroot is:
$CFG->wwwroot = 'http://elearn.cs.man.ac.uk/~stuart';
Where we have installed multiple installs else where and had one or more not at the web tree root, we haven't had this problem. This install is obviously in my /home/stuart/public_html directory. Do you think that the tilda (~) might be freaking moodle out?
--Stuart.