Ok… I am an idiot. I guess that happens when you don’t get enough sleep. Just in case others experience this issue, it is because the permalinks in wordpress 3.0.1 default to http://url/index.php/month/etc. I switched to custom and took out the index.php and all works. DUH.
I have used the nginx settings described above but when I go to register an account it goes to the home page. To get to the register page i have to add index.php to get it to work. IE. http://url/index.php/register. http://url/register does not work. Is there something I am missing with nginx to get ride of the index.php. This also happens with the comments… but the comments at least show up.