I've strugled for a few hours until I finally found all the correct bits and pieces to make kohana with clean url rewritting work for nginx. There are several example configs scattered around the net, but they were all lacking some pieces. There were times when kohana just spat out some plain routing errors and other times when the index / was plain forbidden.

The results came when I finally stopped just copy pasting and really gave some thought into why it would not work as expected, then added 'index index.php' to location / and some other small tweaks here and there and vualia it finally showed the site as expected.

The final virtual host config: