Drupal Hosting Question on Domain pointing to right FTP folder (Godaddy)

I am having trouble accessing links on my site when trying to point a new domain name to a particular folder.

While developing my site, I had all my drupal files in folder called "site1" on ftp. My primary domain was www.mysite1.com (using as example), so I would access my site as "www.mysite1.com/site1".

Now, I need to have a different URL (www.mysite2.com) to the site I developed in folder "site1" on my ftp folder, so I pointed www.mysite2.com to 'site1'.

PROBLEM is that - I get the front page OK but as soon as I click on a link from www.mysite2.com, I get error message "Internal Server Error"

I have tried changing $base_url=www.mysite2.com in settings.php but that did not help.

Thank you in advance for your suggestions.