I have recently made a duplicate copy of a customers Magento installation and put it into a subdirectory of the root.  I did a dump of the database and imported it into a new database.  I changed the local.xml file to reflect the new database.  Now my issue comes when I try to view the site under the new subdirectory to keeps invoking the install as if the local.xml file is missing.  It is clearly there in the app/etc folder within the cloned site, but still the install keeps starting.  Any ideas?  Below I have pasted the connection info in the local.xml file, just in case I miss typed something.

            <default_setup>
                <connection>
                    <host><![CDATA[localhost]]></host>
                    <username><![CDATA[stevenst_newUser]]></username>
                    <password><![CDATA[bmalldo]]></password>
                    <dbname><![CDATA[stevenst_storeupgrade]]></dbname>
                    <active>1</active>
                </connection>
            </default_setup>