I am using apache passenger to deploy rails application.
I have followed each and every step clearly and everything works fine. No error message in deployment.
I placed the application at this particular location var/www/myapplication.
This resolved the error "Symbolic link not allowed or link target not accessible". I will put all the steps I took to resolve this issue.
In addition to this i'll also blog on how to resolve errors involved with first time deployment of rails 3.1 to ec2. here ->
http://recipe4developer.wordpress.com/2011/11/19/correcting-errors-in-first-time-rails-3-1-deployment-to-ec2/