[pzb]

You shouldn't need to chroot apache to avoid serving /etc/passwd. I have never worked on a site with chroot'd Apache, and have never run into these kind of issues.

Are you setting your Apache configuration to only allow reading certain directories?

[DCoder]

It's not just Apache you need to configure - PHP ignores Apache's directory access configurations entirely, you need open_basedir and preferably something like suPHP.

Disabling shell functions (system, exec, etc.) is also a good idea, unless the application itself requires them (e.g. if the host is too stupid/lazy to have the imagick extension installed and tells you to call /usr/bin/imagick instead...).