apache mod_rewrite directory problem

[ShadoFlameX]

I am having a problem with mod_rewrite rewriting the urls such that they are inaccesible. For instance when I attempt to go to

http://tibook-g4.local/~USERNAME/test/old.htm

with the following rewrite rule:

RewriteRule ^old\.htm$ new.htm

it tries to find the file and gives this error:

The requested URL /Users/USERNAME/Sites/test/new.htm was not found on this server.

notice that it is no longer looking in http://tibook-g4.local/~USERNAME/test/ but rather the actual directory location.

Im not sure why it rewrites incorrectly but it must be correctible.

I would love to hear about any solution,
Thanks,
Bryan