styles.css should be style.css

You do not need to do following:

// $Id: template.php,v 1.1 2008/05/29 02:40:09 crashtest Exp $

$theme_path = path_to_theme();

// Add javascript and stylesheets here.
drupal_add_css($theme_path .'/styles.css', 'theme', 'all');

Just rename your styles.css to style.css. Or optionally you may put stylesheets[all][] = styles.css to your .info file