While I agree with everyone about Ubuntu (I'm using Kubuntu on my
desktop), my little Linux server is running Slackware 11 with great
success. If you're wanting to setup a low memory/CPU box, Slackware
has great performance. It's a little more DIY (Do It Yourself), but
there's plenty of documentation around the Interweb. 
Keep up to date with Rails on Twitter and This Week in Rails
Policies: Conduct, License, Maintenance, Security, Trademarks