[OS X Emacs] LaTeX on Aquamacs 1.7 not working

[Anil N. Hirani]

I use Aquamacs on my Mac PPC G4 running latest Mac OS X. Until  
Aquamacs 1.5 LaTeX mode was working fine. Since Aquamacs 1.6 it  
stopped working. LaTeX files are not recognized.

There is a thread in Feb and March 2009 similar to this and answered  
by David Reitter. That thread did not help me but I am providing the  
data (path and shell) that was asked for in that thread and hope  
someone can help me by looking at this data.

In terminal :
% echo $SHELL
/bin/tcsh

In terminal:
% echo $PATH
/Library/Frameworks/Python.framework/Versions/Current/bin:.:/usr/local/ 
bin:/usr/X11/bin:/usr/bin:/bin:/usr/sbin:/sbin:/usr/local/bin:/usr/ 
texbin:/usr/X11/bin

In a shell in Aquamacs 1.5 (where LaTeX mode works fine):
% echo $PATH
/Library/Frameworks/Python.framework/Versions/Current/bin:.:/usr/local/ 
bin:/usr/X11/bin:/Library/Frameworks/Python.framework/Versions/Current/ 
bin:.:/usr/local/bin:/usr/X11/bin:/usr/bin:/bin:/usr/sbin:/sbin:/usr/ 
bin:/bin:/usr/sbin:/sbin:/usr/local/texlive/2008/bin:/usr/local/teTeX/ 
bin/powerpc-apple-darwin-current

In a shell in Aquamacs 1.7 (where LaTeX mode does not work):
% echo $PATH
/Library/Frameworks/Python.framework/Versions/Current/bin:.:/usr/X11/ 
bin:/Library/Frameworks/Python.framework/Versions/Current/bin:.:/usr/ 
local/bin:/usr/X11/bin:/Library/Frameworks/Python.framework/Versions/ 
Current/bin:.:/usr/local/bin:/usr/X11/bin:/usr/bin:/bin:/usr/sbin:/ 
sbin:/usr/local/bin:/usr/texbin:/usr/X11/bin:/Library/Frameworks/ 
Python.framework/Versions/Current/bin:.:/usr/local/bin:/usr/X11/bin:/ 
usr/bin:/bin:/usr/sbin:/sbin:/usr/local/bin:/usr/texbin:/usr/X11/bin:/ 
usr/local/texlive/2008/bin:/usr/local/teTeX/bin/powerpc-apple-darwin- 
current

NOTES :
/usr/texbin appears in my path on a terminal where I can run pdflatex.  
It does not appear in the path in Aquamacs 1.5 shell and I can still  
run pdflatex.

An explicit attempt to switch to latex-mode in Aquamacs 1.7 yields  
"Cannot open load file: latex".

Regards
Anil