nginx version: nginx/0.5.17 drupal 5.1

When attempting to run the clean url test the Enable/Disable box never gets enabled. What am I missing?

    location / {
            root /var/www;
            index index.php;

            if (!-e $request_filename) {
                    rewrite ^(.*)$ /index.php?q=$1 last;
                    break;
            }

    }

If I recall I fixed this last time by going into the database and manually changing the field clean url field but not I cannot seem to locate it.

Thnx