My experience has been great using rails on Dreamhost so far. I found
that it was not the best place to fully deploy a rails environment, but
if the development was done locally and the shared host with limited
access - Dreamhost, just handled the live environment with the fastcgi I
was fine. I wrote an article here
http://topcweb.com/content/ruby-rails-setup Pretty much install instant
rails locally and do your development there. Also feel free to contact
me and I will share further.
My experience has also been very good with Dreamhost and I use
Passenger instead of fastcgi.