Did you upload the theme using the WordPress theme uploader or did you FTP it up? It's just not finding the wp-config.php file I think because it's installed in the /blog/ directory. Here's what you can do:
Go into style.php in the editor and on line 2 either add one more ../ before wp-config.php, or you can delete that line and replace it with this code:
$d = 0; // search depth;
while (!file_exists(str_repeat('../', $d) . 'wp-config.php')) if (++$d > 99) exit;
$wp_config = str_repeat('../', $d) . 'wp-config.php';
require_once($wp_config);
This is the way I should have coded it in the first place, as this just looks for the wp-config.php file one directory at a time and if it doesn't find it, it goes up one more level at a time until it does.
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