Why isn't my variable updating?

I'm having an issue with my code below, where my config variable is being updated in some area, but in the function within http.createServer, it isn't changing. I have some comments to indicate what's going on in the code below. My guess is config is being held onto somewhere, or I don't understand JavaScript scope as well as I thought. Can anyone explain what's going on here?

EDIT: it looks like what was happening is the client & server were keeping the socket open because of the Connection: keep-alive header. For the time being (because this is meant to be a local server with low traffic), I've added res.setHeader('Connection','close'); which appears to fix this issue when using the same client to connect in short intervals after a configuration change.

// global variables & configuration
var fs = require('fs');
var utils = require('./utils.js');
var configFile = 'config.json';
var initialConfig = JSON.parse(fs.readFileSync(configFile));
var server = {};

// watch file system for changes to configuration
fs.watchFile(configFile, function(curr, prev) {
    console.log('config change detected');
    // reload the configuration
    var config = JSON.parse(fs.readFileSync(configFile)); // config is correct
    if (typeof server !== 'undefined') {
        server.close();
    }
    serveStatic(config);
});

// start the server
serveStatic(initialConfig);

// server functions
function serveStatic(config) {
    var http = require('http'); // config is the new (correct) value
    var startTime;
    server = http.createServer(function(req, res) { // config is the old value, never changes
        try {
            // solution: res.setHeader('Connection','close');
            res.end(JSON.stringify(config));
        } catch (err) {
            if (res.statusCode === 200)
                res.statusCode = 500;
            res.write(http.STATUS_CODES[res.statusCode]);
            if (config.detailed_errors)
                res.write('\n' + err);
            res.end();
        }
    });
    console.log('Starting server on port ' + config.port);
    server.listen(config.port);
}