Can you give a longer traceback?
You probably have some code, potentially in a third-party application, which is trying to do:
from django.conf import settings
settings.DATABASE_ENGINE
If you drop back to Django 1.3.1 this would probably not be an issue, because the DATABASE_ENGINE was still valid (although deprecated) but in 1.4 it is (I think) no longer available.
Regards,
Gary