I'm a coauthor of a Rails plugin that patches a few things to make development mode almost as fast as production mode (while still reloading classes and templates).
Check it out on GitHub: GitHub - thedarkone/rails-dev-boost: Speed up slow Rails development mode
Unfortunately it is only compatible with Rails 2.2 (checkout the master branch of the plugin) or Rails 2.3 i.e. v2.3.0 tag (checkout the rails-2-3 branch of the plugin). Those of you still running 2.1 now finally have the real [sic!] incentive to upgrade :).