I would recommend the account_location plugin (script/plugin install http://dev.rubyonrails.org/svn/rails/plugins/account_location/) and use the subdomain as the identifier:
You’ll just need to put a wildcard a-record in your dns entries (*.myapp.com) in order to forward all subdomain to your rails app. If you want to test it locally (and want to use the subdomain, add a few entries in your hosts (*nix) file or hosts in system32 on windows that point to localhost).
It’s just so much more intuitive and gives a real feeling of custom branding (a subjective feeling your customer gets because it’s the very first thing in the url).
Peter De Berdt