mod_perl vs. mod_rewrite precedence?

I'm trying to figure out how mod_perl and mod_rewrite work together.
This is with Apache 1.3.41, mod_perl 1.30, perl 5.8,9.

It seems that if there is a mod_perl handler installed at a location,
a mod_rewrite rule rewriting that location to another doesn't have any
effect.

Below is a sample httpd.conf file. It installs mod perl handlers at
/perl1 and /perl2. The mod_rewrite rules rewrite /perl2 -> /foo.txt (a
file which exists), /bar -> /foo.txt and /baz -> /perl1.

Here is what I am seeing:

GET /perl2 -> returns the output of the mod-perl handler
GET /bar -> returns the contents of the file foo.txt (as expected)
GET /baz -> returns a 404 error; inspecting the rewrite log file shows
that it is trying to serve the file DOCUMENT_ROOT/perl1

Can anyone explain what is going on?

Thanks,
ER

RewriteEngine On
RewriteLog /tmp/rewrite

RewriteCond %{REQUEST_URI} ^/perl2 [NC]
RewriteRule .* /foo.txt [L]

RewriteCond %{REQUEST_URI} ^/bar [NC]
RewriteRule .* /foo.txt [L]

RewriteCond %{REQUEST_URI} ^/baz [NC]
RewriteRule .* /perl1 [L]

RewriteLogLevel 9

<Perl>
  package MyHandler;
  use Apache::Constants qw(OK);
  sub handler {
    my $r = shift;
    $r->content_type("text/plain");
    $r->print("Now is @{[scalar(localtime(time))]}\n");
    return OK;
  }
  package ApacheReadConfig;
  my $app = {
    SetHandler => 'perl-script',
    PerlHandler => 'MyHandler',
  };
  $Location{'/perl1'} = $app;
  $Location{'/perl2'} = $app;
</Perl>