redmine in subfolder issue (Apache, mod_passenger, Ruby + Drupal site in main folder)

Question

I have Redmine in subfolder /var/www/redmine and Drupal in folder /var/www/

When I go to URL mysite.com/redmine, Redmine shows ok, but mysite.com/redmine/login is (over)handled by Drupal.

Apache config is as follows

<VirtualHost *:80>
        ServerAdmin webmaster@localhost

        DocumentRoot /var/www

        <Directory />
                Options FollowSymLinks
                AllowOverride None
        </Directory>
        <Directory /var/www/>
        RailsBaseURI /redmine

        PassengerResolveSymlinksInDocumentRoot on
                Options Indexes FollowSymLinks -MultiViews
                AllowOverride All
                Order allow,deny
                allow from all
        </Directory>

.htaccess file is

<IfModule mod_deflate.c>
    AddOutputFilterByType DEFLATE text/css application/x-javascript application/javascript text/plain text/html text/xml application/xml
</IfModule>

# Protect files and directories from prying eyes.
<FilesMatch "\.(engine|inc|info|install|make|module|profile|test|po|sh|.*sql|theme|tpl(\.php)?|xtmpl)(|~|\.sw[op]|\.bak|\.orig|\.save)?$|^(\..*|Entries.*|Repository|Root|Tag|Template)$|^#.*#$|\.php(~|\.sw[op]|\.bak|\.orig\.save)$">
  Order allow,deny
</FilesMatch>

# Don't show directory listings for URLs which map to a directory.
Options -Indexes +ExecCGI

# Follow symbolic links in this directory.
Options +FollowSymLinks +ExecCGI

# Make Drupal handle any 404 errors.
ErrorDocument 404 /index.php

# Set the default handler.
DirectoryIndex index.php index.html index.htm

# Override PHP settings that cannot be changed at runtime. See
# sites/default/default.settings.php and drupal_environment_initialize() in
# includes/bootstrap.inc for settings that can be changed at runtime.
# PHP 5, Apache 1 and 2.
<IfModule mod_php5.c>
  php_flag magic_quotes_gpc                 off
  php_flag magic_quotes_sybase              off
  php_flag register_globals                 off
  php_flag session.auto_start               off
  php_value mbstring.http_input             pass
  php_value mbstring.http_output            pass
  php_flag mbstring.encoding_translation    off
</IfModule>

# Requires mod_expires to be enabled.
# Turn on Expires and set default to 0
ExpiresActive On
ExpiresDefault A0

# Set up caching on media files for 1 year (forever?)
<FilesMatch "\.(flv|ico|pdf|avi|mov|ppt|doc|mp3|wmv|wav)$">
    ExpiresDefault A29030400
    Header append Cache-Control "public"
</FilesMatch>

# Set up caching on media files for 1 week
<FilesMatch "\.(gif|jpg|jpeg|png|swf)$">
    ExpiresDefault A2419200
    Header append Cache-Control "public"
</FilesMatch>

# Set up 2 Hour caching on commonly updated files
<FilesMatch "\.(xml|txt|html|js|css)$">
    ExpiresDefault A7200
    Header append Cache-Control "private"
</FilesMatch>

# Force no caching for dynamic files
<FilesMatch "\.(php|cgi|pl|htm)$">
    ExpiresActive Off
    Header set Cache-Control "private, no-cache, no-store, proxy-revalidate, no-transform"
    Header set Pragma "no-cache"
</FilesMatch>


# Various rewrite rules.
<IfModule mod_rewrite.c>
  RewriteEngine on

  RewriteRule ^media/(.*)$ /sites/default/files/$1 [L]
  # Set "protossl" to "s" if we were accessed via https://.  This is used later
  # if you enable "www." stripping or enforcement, in order to ensure that
  # you don't bounce between http and https.
  RewriteRule ^ - [E=protossl]
  RewriteCond %{HTTPS} on
  RewriteRule ^ - [E=protossl:s]
  # Block access to "hidden" directories whose names begin with a period. This
  # includes directories used by version control systems such as Subversion or
  # Git to store control files. Files whose names begin with a period, as well
  # as the control files used by CVS, are protected by the FilesMatch directive
  # above.
  #
  # NOTE: This only works when mod_rewrite is loaded. Without mod_rewrite, it is
  # not possible to block access to entire directories from .htaccess, because
  # <DirectoryMatch> is not allowed here.
  #
  # If you do not have mod_rewrite installed, you should remove these
  # directories from your webroot or otherwise protect them from being
  # downloaded.
  RewriteRule "(^|/)\." - [F]
  # If your site can be accessed both with and without the 'www.' prefix, you
  # can use one of the following settings to redirect users to your preferred
  # URL, either WITH or WITHOUT the 'www.' prefix. Choose ONLY one option:
  #
  # To redirect all users to access the site WITH the 'www.' prefix,
  # (http://example.com/... will be redirected to http://www.example.com/...)
  # uncomment the following:
  # RewriteCond %{HTTP_HOST} .
  # RewriteCond %{HTTP_HOST} !^www\. [NC]
  # RewriteRule ^ http%{ENV:protossl}://www.%{HTTP_HOST}%{REQUEST_URI} [L,R=301]
  #
  # To redirect all users to access the site WITHOUT the 'www.' prefix,
  # (http://www.example.com/... will be redirected to http://example.com/...)
  # uncomment the following:
  # RewriteCond %{HTTP_HOST} ^www\.(.+)$ [NC]
  # RewriteRule ^ http%{ENV:protossl}://%1%{REQUEST_URI} [L,R=301]
  # Modify the RewriteBase if you are using Drupal in a subdirectory or in a
  # VirtualDocumentRoot and the rewrite rules are not working properly.
  # For example if your site is at http://example.com/drupal uncomment and
  # modify the following line:
  # RewriteBase /drupal
  #
  # If your site is running in a VirtualDocumentRoot at http://example.com/,
  # uncomment the following line:
  RewriteBase /
  # Pass all requests not referring directly to files in the filesystem to
  # index.php. Clean URLs are handled in drupal_environment_initialize().
  RewriteCond %{REQUEST_FILENAME} !-f
  RewriteCond %{REQUEST_FILENAME} !-d
  RewriteCond %{REQUEST_URI} !=/favicon.ico
  RewriteRule ^ index.php [L]
  # Rules to correctly serve gzip compressed CSS and JS files.
  # Requires both mod_rewrite and mod_headers to be enabled.
  <IfModule mod_headers.c>
    # Serve gzip compressed CSS files if they exist and the client accepts gzip.
    RewriteCond %{HTTP:Accept-encoding} gzip
    RewriteCond %{REQUEST_FILENAME}\.gz -s
    RewriteRule ^(.*)\.css $1\.css\.gz [QSA]
    # Serve gzip compressed JS files if they exist and the client accepts gzip.
    RewriteCond %{HTTP:Accept-encoding} gzip
    RewriteCond %{REQUEST_FILENAME}\.gz -s
    RewriteRule ^(.*)\.js $1\.js\.gz [QSA]
    # Serve correct content types, and prevent mod_deflate double gzip.
    RewriteRule \.css\.gz$ - [T=text/css,E=no-gzip:1]
    RewriteRule \.js\.gz$ - [T=text/javascript,E=no-gzip:1]
    <FilesMatch "(\.js\.gz|\.css\.gz)$">
      # Serve correct encoding type.
      Header set Content-Encoding gzip
      # Force proxies to cache gzipped & non-gzipped css/js files separately.
      Header append Vary Accept-Encoding
    </FilesMatch>
  </IfModule>
</IfModule>