I guess it's from this. I had a similar situation and messed with some settings detailed below and got it working. I don’t actually remember what I did, but I guess I removed the 'PythonOption django.root /mysite' option in apache config.
From http://docs.djangoproject.com/en/dev/howto/deployment/modpython/
New in Django 1.0: The PythonOption django.root ... is new in this version.
Because mod_python does not know we are serving this site from underneath the /mysite/ prefix, this value needs to be passed through to the mod_python handler in Django, via the PythonOption django.root ... line. The value set on that line (the last item) should match the string given in the <Location ...> directive. The effect of this is that Django will automatically strip the /mysite string from the front of any URLs before matching them against your URLConf patterns. If you later move your site to live under /mysite2, you will not have to change anything except the django.root option in the config file.
When using django.root you should make sure that what's left, after the prefix has been removed, begins with a slash. Your URLConf patterns that are expecting an initial slash will then work correctly. In the above example, since we want to send things like /mysite/admin/ to /admin/, we need to remove the string /mysite from the beginning, so that is the django.root value. It would be an error to use /mysite/ (with a trailing slash) in this case.
Note that we're using the <Location> directive, not the <Directory> directive. The latter is used for pointing at places on your filesystem, whereas <Location> points at places in the URL structure of a Web site. <Directory> would be meaningless here.
Also, if your Django project is not on the default PYTHONPATH for your computer, you'll have to tell mod_python where your project can be found:
<Location "/mysite/">
SetHandler python-program
PythonHandler django.core.handlers.modpython
SetEnv DJANGO_SETTINGS_MODULE mysite.settings
PythonOption django.root /mysite
PythonDebug On
PythonPath "['/path/to/project'] + sys.path"
</Location>
Does this sound anything meaningful?
~Shakthi