Nginx, Wordpress and URL rewriting problems

Trying to get Nginx and Wordpress to play nicely but it seems that they don't understand each other quite yet, especially in terms of pretty urls and rewriting.

I have the following snippet in my config file for nginx at the bottom (got it from Nginx's wiki page on WP), and I keep getting this error message in my error log, which makes me think it's not even trying to rewrite the location.

2011/04/11 09:02:29 [error] 1208#1256: *284 "c:/local/path/2011/04/10/hello-world/index.html" is not found (3: The system cannot find the path specified), client: 127.0.0.1, server: localhost, request: "GET /2011/04/10/hello-world/ HTTP/1.1", host: "dev.local:83"

If anyone can help give me direction or pointers or links or suggestions, that would be amazing because I'm seriously stuck. Thanks!

NGINX

worker_processes  1;
pid        logs/nginx.pid;

events {
    worker_connections  64;
}

http {
    include       mime.types;
    default_type  application/octet-stream;

    sendfile        on;
    keepalive_timeout  65;

    #gzip
    gzip on;
    gzip_http_version 1.0;
    gzip_comp_level 2;
    gzip_proxied any;
    gzip_min_length  1100;
    gzip_buffers 16 8k;
    gzip_types text/plain text/html text/css application/x-javascript text/xml application/xml application/xml+rss text/javascript;

    # Some version of IE 6 don't handle compression well on some mime-types, so just disable for them
    gzip_disable "MSIE [1-6].(?!.*SV1)";
    # Set a vary header so downstream proxies don't send cached gzipped content to IE6
    gzip_vary on;


    server {
        listen       83;
        server_name  localhost  dev.local;
        root   c:/local/path;
        index  index.php;

        location / {
            try_files $uri $uri/ /index.php;
        }

        #pass the PHP scripts to FastCGI server listening on 127.0.0.1:9000
        location ~ \.php$ {
            fastcgi_pass   127.0.0.1:521;
            fastcgi_split_path_info ^(.+\.php)(/.+)$;
            fastcgi_intercept_errors on;
            fastcgi_index  index.php;
            fastcgi_param  SCRIPT_FILENAME  $document_root$fastcgi_script_name;
            include        fastcgi_params;
        }
    }

}

Absolute paths like the one you specified gets translated into a /cygdrive/c/-path even if you don't have cygwin installed. For Windows I suggest you use relative paths if possible. Relative to the nginx directory.