node.js + express 3 + socket.io = Can't set headers after they are sent

I'm new to learning node.js and seem to have run into an error that can't get to fix.

Its a very simple and beginners code so shouldn't need much explanation, more over it works fine on localhost, but breaks on production server.

App.js

var express = require('express')
  , routes = require('./routes')
  , http = require('http')
  , path = require('path');

var app = express();

app.configure(function(){
  app.set('port', process.env.PORT || 8000);
  app.set('views', __dirname + '/views');
  app.set('view engine', 'jade');
  app.use(express.favicon());
  app.use(express.logger('dev'));
  app.use(express.bodyParser());
  app.use(express.methodOverride());
  app.use(app.router);
  app.use(express.static(path.join(__dirname, 'public')));
});

app.configure('development', function(){
  app.use(express.errorHandler());
});

app.get('/', routes.index);

var server = app.listen(8000);
var io = require('socket.io').listen(server);

server.listen(app.get('port'), function(){
  console.log("Express server listening on port " + app.get('port'));
});

And here's the dreaded error!

http.js:644
    throw new Error('Can\'t set headers after they are sent.');
          ^
Error: Can't set headers after they are sent.
    at ServerResponse.OutgoingMessage.setHeader (http.js:644:11)
    at ServerResponse.res.setHeader (/home1/artalatc/public_html/cloud1/node_modules/express/node_modules/connect/lib/patch.js:59:22)
    at next (/home1/artalatc/public_html/cloud1/node_modules/express/node_modules/connect/lib/proto.js:153:13)
    at Function.app.handle (/home1/artalatc/public_html/cloud1/node_modules/express/node_modules/connect/lib/proto.js:198:3)
    at Server.app (/home1/artalatc/public_html/cloud1/node_modules/express/node_modules/connect/lib/connect.js:66:31)
    at Manager.handleRequest (/home1/artalatc/public_html/cloud1/node_modules/socket.io/lib/manager.js:564:28)
    at Server.<anonymous> (/home1/artalatc/public_html/cloud1/node_modules/socket.io/lib/manager.js:118:10)
    at Server.EventEmitter.emit (events.js:115:20)
    at HTTPParser.parser.onIncoming (http.js:1793:12)
    at HTTPParser.parserOnHeadersComplete [as onHeadersComplete] (http.js:111:23)

Problem seems to be at var io = require('socket.io').listen(server); because commenting this like removes the error.