I’ve been using Dreamhost for about a year now for hosting a small Rails app (low-volume e-commerce). My experience with Dreamhost thus far is that they do a good job of providing Rails preinstalled, but it’s not particularly reliable once it is running. I get frequent 500 errors, and startup time is slow because they actively kill running fcgi processes. In other words, it’s ok for simple stuff, but if you are doing anything serious with it. They also seem to have frequent email outages.

Dreamhost is fantastic for PHP hosting though, and you get a lot for your money.

I’ve decided to switch over to Slicehost for a VPS - $20/mo for a 256 mb slice is a great value.