~/Sites folder gives 403 error
Take a look at other directories' permissions; for example, your home directory vs. the other home directories:

ls -le /Users/


It should look something like this:

drwxr-xr-x+ 13 user1   staff   442 12 Nov  2010 user1/
 0: group:everyone deny delete
drwxr-xr-x+ 63 user2   staff  2142  9 Aug 16:55 user2/
 0: group:everyone deny delete


There's a good chance that your home directory has somehow been set to different permissions (e.g. 700), and that's causing Apache to choke.