Cookies/Session Management

Well, you can work around this issue by making your website work on
www.foo.com and all other subdomains to redirect to your website.

If you tell rails to use *.foo.com for your cookie (dunno how to do
that), you are going to have problems if you decide to use a subdomain
for something else, like a forum, that usually sets a cookie on its
own.

As it is, this is indeed an issue with you/app and not the web host.