Safari in /Applications is latest (4.x). Safari in ~/Applications is older version (3.1.1) Webkit won't start and the error is less than helpful. "Safari 3.1.1 is not supported Nightly builds of WebKit are not supported with Safari 3.1.1 at this time. Please update to a newer version of Safari." I had no idea I had an older version in ~/Applications. A slightly improved error message or the ability to choose to use /Applications when it is the correct version would be most helpful. I had simply stopped updating nightly builds as I figured it was a bug that would be fixed soon, when in reality the problem was with my machine.
The nightly build launcher searches for Safari in the standard application search path (~/Applications, /Applications, /Network/Applications). By design applications in your home directory take precedence over applications later in the search path.