I think your current config is too complicated now so that your regular
expressions do not do what you think they should.

Try a separate server setup in this manner:
server {
        listen   80 default;
        server_name  .example.com;

        set $project www;
        set $user www-data;


        if ($host ~* ^([^.]+)\.([^.]+)\.example\.com$) {
            set $project $1;
            set $user $2;
        }

 if (!-d /home/$user/sites/$project/public) { rewrite ^(.*)$
http://www.example.com permanent; }
 root   /home/$user/sites/$project/public;
 index index.php index.htm index.html;
}

Create some dns names like user1.www.example.com (or just put them to your
local hosts file) all pointing to the same host.
Create folders /home/user1/sites/www/public and put index.html stating "This
is a home of user1" there.
Make sure you have access and error logs.

It should work.

Posted at Nginx Forum: 
http://forum.nginx.org/read.php?2,252553,252585#msg-252585

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