Ubuntu – .htaccess working on remote server but does not work on localhost. Getting 404 errors on localhost

MY PROBLEM:

When I visit localhost the site does not work. It shows some text from the site but it seems the server can not locate any other files. Here is a snippet of the errors from firebug:

"NetworkError: 404 Not Found - localhost/css/popup.css"
"NetworkError: 404 Not Found - localhost/css/style.css"
"NetworkError: 404 Not Found - localhost/css/player.css"
"NetworkError: 404 Not Found - localhost/css/ui-lightness/jquery-ui-1.8.11.custom.css"
"NetworkError: 404 Not Found - localhost/js/jquery.js"

It seems my server is looking for the files in the wrong places. For example, localhost/css/popup.css is actually located at localhost/app/webroot/css/popup.css.

I have my site setup on a remote server with the same exact configurations and it works perfectly fine. I am just having this issue trying to run the site on my laptop at localhost. I edited my VirtualHosts file DocumentRoot and to /home/user/public_html/site.com/public/app/webroot/ and this reduces some errors but I feel that this is wrong and sort of hacking it since I didn't use these setting on my production server which works.

The last note I want to make is that the website uses dynamic URLs. I dont know if that has anything to do with it. For example, on the production server the URLS are: site.com/#hello/12321.

HERES WHAT I AM WORKING WITH:

I have a LAMP server setup on my laptop which runs on Ubuntu 11.10.

I have enabled mod_rewrite:

sudo a2enmod rewrite

Then I edited my Virtual Hosts file:

<VirtualHost *:80>
  ServerName  localhost
  DirectoryIndex index.php
  DocumentRoot /home/user/public_html/site.com/public

    <Directory /home/user/public_html/site.com/public/>
            Options Indexes FollowSymLinks MultiViews
            AllowOverride All
            Order allow,deny
            allow from all
    </Directory>
</VirtualHost>

Then I restarted apache.
My website is using cakePHP. This is the directory structure of the website:
"/home/user/public_html/site.com/public" contains:

index.php app cake plugins vendors

These are my .htaccess files:

/home/user/public_html/site.com/public/app/.htaccess:

<IfModule mod_rewrite.c>
    RewriteEngine on
    RewriteRule    ^$    webroot/    [L]
    RewriteRule    (.*) webroot/$1    [L]
 </IfModule>

/home/user/public_html/site.com/public/app/webroot/.htaccess:

<IfModule mod_rewrite.c>
    RewriteEngine On
    RewriteCond %{REQUEST_FILENAME} !-d
    RewriteCond %{REQUEST_FILENAME} !-f
    RewriteRule ^(.*)$ index.php?url=$1 [QSA,L]
</IfModule>