It's a double-edged sword.
I've been involved with rails pretty extensively now for a few years, and i've enjoyed the platform for the most part. A few projects we've launched have grown pretty complex, and we too have had some problems with the code management, but discipline seems to help and a steady peer review.
Ive been working with Java pretty much exclusively since the late 90's, with exception of the last few years which have been focused on Rails projects. I've recently been working with Grails (Grails.org) which is a Java based stack taking the great concepts from RoR platform.
As someone who has never worked with Java, I believe that Grails might not be as easy to pickup and learn, but as someone who has an extensive Java background, it's a serious breath of fresh air. For a large scale project, I MUCH prefer grails code management to rails approach. Obviously with my Java background, i'm partial to Grails.
On the note of deployed code, a few of our rails projects have grown to be pretty large. I've had to implement a LOT of hardware to handle the scaling of usage. We've been able to do a lot of improvements to the code, but compared to the speed and efficiency of Java (Yeah, I never thought i'd say that) I'm a little bit 'burnt' on rails.
Comparing something like Passenger on Apache to Glassfish or Tomcat is like getting out of a 2009 BMW 5 series and jumping into a 1991 Kia.
The first time in YEARS i have had run-away processes take down an entire server, I've migrated all of our servers to Xen servers because i got tired of driving to the datacenter 1-2x a week or making a remote hands call to reboot a server because a zealous process took things down. (Did I mention i bought a load balancer to manage the traffic, i'm doing on 10 machines what i used to do on 3 machines w/my java apps)..
I'm sure that there are folks that know Rails better than I do, we're a do-everything group (4 guys managing a LOT of code and servers), not a large IT shop by any stretch, but on one hand we've hit epic levels of productivity. We've gotten projects out fast, and some of them have done well. We've had other projects we assumed would do great, but ended up failing due to marketing miscalculations. The lesson I'd say i've learned with Rails, is it's better to get a 'good enough' product out the door and then figure out how to tighten it down later than not even make it to the race.
I'm hoping that i can bypass that compromise with Grails, but time will tell. :)
Either way , Rails absolutely has it's place in the Open Source server software stack world. In the end it's just a matter of remembering that if you are doing rails programming, you better be doing it with a Test-Driven development style, as large projects can get out of control.
I've not looked at RoR 3.0, but i'm hoping that they have implemented a Service-style implementation for business logic, rather than encouraging to have it thrown into the Models.