It appears that latest php version 5.1.6-20.el5_2.1 under RHEL / CentOS Linux v5.2 has made some major changes. As a result choort jail setup using previous instructions no longer works.

PHP is crashing with segmentation fault errors. So I had to trace php errors using strace command. After spending couple of hours I found solution for following errors:

Sep 15 03:26:59 lightyproxy kernel: php-cgi[19106]: segfault at 0000003151c1b4b8 rip 0000003151e98477 rsp 00007fff9ecdde20 error 6
Sep 15 03:26:59 lightyproxy kernel: php-cgi[19107]: segfault at 0000003151c1b4b8 rip 0000003151e98477 rsp 00007fff9ecdde20 error 6
Sep 15 03:26:59 lightyproxy kernel: php-cgi[19108]: segfault at 0000003151c1b4b8 rip 0000003151e98477 rsp 00007fff9ecdde20 error 6
Sep 15 03:26:59 lightyproxy kernel: php-cgi[19110]: segfault at 0000003151c1b4b8 rip 0000003151e98477 rsp 00007fff9ecdde20 error 6

WARNING! These examples / workaround is only for RHEL / CentOS 5.2 and not for Debian / Ubuntu / FreeBSD lighttpd chroot instructions.

You need to copy entire /etc/ and /usr/share/zoneinfo/ to jail. If your jail is located at /jail directory enter following commands:
# service lighttpd stop
# D=/path/to/chroot/jail
# mkdir /root/jail.etc
# /bin/cp -avr $D/etc/* /root/jail.etc
# /bin/cp -avr /etc/* $D/etc/
Copy back original customized files such as passwd, group, php.ini :
# cp -avr /root/jail.etc/* $D/etc/
Now copy /usr/share/zoneinfo/:
# cd $D/usr/share
# cp -avr /usr/share/zoneinfo/ .
Copy all latest php-cgi and all extensions to $D
# cd $D/usr/bin
# cp /usr/bin/php-cgi .
# l2chroot php-cgi
Copy php modules (for 64 bit use $D/usr/lib64):
# cd $D/usr/lib/
# cp -avr /usr/lib/php/ .
# cd php/modules
# for l in *.so; do l2chroot $l; done
Start lighttpd:
# service lighttpd start
This should fix all errors. Watch /var/log/messages for php errors:
# tail -f /var/log/messages