Hmm, here's what I'm using, and it works fine:

If I were you guys, I would test to see exactly what your include_path is set to:

I hate it when people post "I solved my problem, thanks," without actually telling everybody how they figured out the solution.

It turns out my apache was set up to only allow access to my public_html directory and NOT the entire website directory.

For example:

/var/www/vhosts/domain.com/httpdocs

and not

/var/www/vhosts/domain.com/

which it needs to access application/, library/, etc.

I had to setup a vhost.conf file in my conf/ folder to allow php to access files OUTSIDE of the documentroot.

I don't know what you guys are using but this article might shed some light on this problem: Aaron Gadberry Blog Archive Using Plesk and vhost.conf

This problem basically involves PHP's open_basedir setting. Change your index.php file and try to require a file OUTSIDE of your document root and it should show you that it doesn't have permission to access stuff outside of the docroot.

Hope that helps.