Apache's errorlog will explain why you get a permission denied. Also, serverfault.com is a better forum for a question like this.
If the error log simply says "permission denied", su to the user that the webserver is running as and try to read from the file in question. So for example:
sudo -s
su - nobody
cd /
cd /home
cd user
cd xxx
cat index.html
See if one of those gives you the "permission denied" error.