Unexpected response code: 502 nginx

i have the following setup:

nginx server running as a proxy:

server {
    server_name  domain.tld;
    location / {
            # For Read Requests
            proxy_pass http://XXX.XXX.XXX.XXX;
            proxy_set_header        Host            $host;
            proxy_set_header        X-Real-IP       $remote_addr;
            proxy_set_header        X-Forwarded-For $proxy_add_x_forwarded_for;
    }
    location ~* "(/config.json|/nowjs/now.js|socket.io|/stat/1.gif)" {
            proxy_pass http://127.0.0.1:9080;
            proxy_set_header        Host            $host;
            proxy_set_header        X-Real-IP       $remote_addr;
            proxy_set_header        X-Forwarded-For $proxy_add_x_forwarded_for;
    }
}

where XXX.XXX.XXX.XXX is the IP domain for my static content pages and assets.

i have a simple chat application running on same server as the nginx on port 9080

in my index.html page, i have this code:

  <div id="chat">
    <div id="messages"></div>
    <input type="text" id="text-input" />
    <input type="button" value="Send" id="send-button" />
  </div>

  <script type="text/javascript" src="http://domain.tld/nowjs/now.js"></script>
  <script type="text/javascript">
    $(document).ready(function(){
        now.receiveMessage = function(name, message){
        $("#messages").append('<br />' + '<a href="${path}">' + name + '</a>' + ': ' + message);
        }
        $("#send-button").click(function(){
        now.distributeMessage($("#text-input").val());
        $("#text-input").val("");
        });
      now.name = "${name}";
    });
  </script>

and here is the app.js file:

var server = require('http').createServer(function(req, res){
  res.writeHead(200, {'Content-Type': 'text/plain'});
  res.end('Chat Server\n');
});
server.listen(9080);

var nowjs = require("now");
var everyone = nowjs.initialize(server);

everyone.now.distributeMessage = function(message){
  console.log('User '+this.now.name+' added message ' +message);
  everyone.now.receiveMessage(this.now.name, message);
};

everything seems to be running ok, although i keep getting the Unexpected response code: 502 when the page loads up!

is there a way to enable the web proxy for nginx, as looking further using Firefox Firebug, i get this error:

Firefox can't establish a connection to the server at ws://domain.tld/socket.io/1/websocket/-WFvaQTvzASDBMHNpUGA.

any advise much appreciated.