Many thanks to the creator himself (Igor Sysoev) for the tips.

The actually good (and works) version:

nginx.conf:

events {
  worker_connections 1024;
}

http {
  include mime.types;
  default_type application/octet-stream;
  sendfile on;
  keepalive_timeout 65;
  gzip on;
  server {
    listen 80;
    server_name 10.1.1.10;
    root /srv/http/root;
    index index.html index.htm index.php;

    location ~ ^/~([^/]+)(/.*.php)$ {
      alias /home/$1/public_html$2;
      disable_symlinks if_not_owner;
      # try_files in here tries "alias$vars", therefore
      # pass blank string to test for alias location
      try_files "" =404;
      include php_params;
    }
    location ~ ^/~([^/]+)($|/.*)$ {
      alias /home/$1/public_html$2;
      disable_symlinks if_not_owner;
      # similar as above and also test / for index.
      try_files "" / =404;
    }

    location ~ .php$ {
      try_files $uri @404;
      include php_params;
    }
    location ~ /. {
      deny all;
    }
  }
}

php_params (because I’m lazy and the configs are easier to read this way):

fastcgi_pass 127.0.0.1:8000;
fastcgi_index index.php;
fastcgi_param SCRIPT_FILENAME $request_filename;
include fastcgi_params;

UPDATE: try_files, alias and captures doesn’t seem to work properly. I recommend to use error_page instead for now. There’s no confirmation if it’s a bug yet

Update 2012-07-10: Updated configuration.