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nginx + php-fpm cycle redirection error on linode new vps

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http://serverfault.com – Im new to nginx and im trying to make my first server run. I followed this guide http://evansolomon.me/notes/faster-wordpress-multisite-nginx-batcache/ as im trying to use it for a multisite wordpress site. Anyway after installing everything i get a 500 Internal server error. If i check logs i see this: 012/09/27 08:55:54 [error] 11565#0: *8 rewrite or internal redirection cycle while internally redirecting to "/index.html", client: xxx.xxx.xxx.xxx, server: localhost, request: "GET /favicon.ico HTTP/1.1", host: "www.mydomain.com" 2012/09/27 08:59:32 [error] 11618#0: *1 rewrite or internal re (HowTos)