Basic Authentication using Apache and mod_rails

http://code.google.com/p/phusion-passenger/issues/detail?id=94&can=1&q=allow&colspec=ID%20Type%20Status%20Priority%20Milestone%20Stars%20Summary

Copy pasted from the above link:

What steps will reproduce the problem?
1. Add a password file with htpasswd
2. 
       ServerName caswell-box
       DocumentRoot /home/user/app/public
       
               Options FollowSymLinks
               AllowOverride None
               Order allow,deny
               Allow from all
               AuthName "Enter password"
               AuthUserFile /etc/apache2/passfile.passwd
               AuthType Basic
               Require valid-user
       


3. Attempt to access the app in your web browser, and either enter the
wrong user/pass or hit cancel.

What is the expected output? What do you see instead?

The expected output is an authentication rejection, instead while the
static assets handled by Apache are restricted, the rails app is run by
passenger and generates pages without CSS/images.

What version of the product are you using? On what operating system?

Ubuntu 8.04, Passenger 1.9.1 RC2

Please provide any additional information below.

Looks like Passenger does not inherit the permissions from apache.