Installing auctex from source

[smanek]

You will find some details below, but for the impatient I installed
auctex from source, but can't seem to compile any TeX/LaTeX documents.

When I open document.tex (a LaTeX file) in Emacs, it automatically
starts up auctex mode. However, when I try to compile a .tex file with
'C-c C-c RET', the status line reads "LaTeX: problems after [0]
pages."

A buffer called *document output* is also opened that reads:
"""
Running `LaTeX' on `ps0' with ``latex  -interaction=nonstopmode
"\input" document.tex''
/bin/sh: latex: not found

LaTeX exited abnormally with code 127 at Mon Feb 23 01:31:25
"""

latex is in my path. When I open up a terminal, I can execute latex
and 'which pdflatex' responds correctly.

Below you will find some (potentially irrelevant) background info:
-Using Ubuntu 8.10
-Have installed TeX Live 2008 into /home/abc/usr/local/texlive
-Have added /home/abc/usr/local/texlive/2008/bin/ to my $PATH (it is
the directory containing all the TeXLive binaries, including latex)
-Using stock Ubuntu GNU Emacs 22.2.1

I installed auctex from source with the following series of commands:
./configure --with-texmf-dir=/home/abc/usr/local/texlive/texmf-local/
make
sudo make install

There are no errors or warnings during any of this - and the ./
configure is able to locate pdftex, emacs, etc.

Any suggestions?