Securing wp-config results in error

I know this information must be elsewhere but I was unable to find it.

I have a new wordpress installation, and attempting to follow the instructions in the Hardening WordPress document, however have two problems.

1. when I set the permission of wp-config.php to 640 (or 740 as the doc states) to disallow reading of this file, wordpress gives the following error when trying to access dashboard or login:

Warning: require_once(/home/xxxx/public_html/v1/wp-config.php) [function.require-once]: failed to open stream: Permission denied in /home/xxxx/public_html/v1/wp-load.php on line 29

Fatal error: require_once() [function.require]: Failed opening required '/home/xxxx/public_html/v1/wp-config.php' (include_path='.:/usr/lib/php:/usr/local/lib/php') in /home/xxxx/public_html/v1/wp-load.php on line 29

2. The Hardening wordpress document states the wp-config.php file can be moved one level above the wordpress installation – is this IN the includes folder or elsewhere? I have tried moving it within the includes folder, but then wordpress thinks there isn’t a config file and wants to create another.