Short and sweet. Here all the commands I run in this order to set up a brand new box. It usually takes about 10 - 15 minutes on a 256 MB RAM instance. Compiling Ruby Enterprise Edition, which is super easy, will take the most amount of time. It will seem to have gotten stuck. It hasn't. It just takes a little while.

# Update, upgrade and install all necessary packages for Ruby on Rails server if you've got a fresh Ubuntu slice
apt-get update
apt-get upgrade
apt-get install build-essential patch libssl-dev libreadline5-dev
apt-get install ruby1.8-dev ruby1.8 ri1.8 rdoc1.8 irb1.8 libreadline-ruby1.8 libruby1.8 libopenssl-ruby imagemagick librmagick-ruby1.8 librmagick-ruby-doc libfreetype6-dev xml-core postfix
postfix will prompt you for details
use Internet Site and enter in the domain name you are planning on sending email from
apt-get install apache2 apache2-prefork-dev libapr1-dev libaprutil1-dev libcurl4-openssl-dev git-core mysql-server mysql-client libmysqlclient15-dev libmysql-ruby
mysql will also prompt you to set up a root user account. set the password to be anything you like
next, download the latest release of ruby enterprise edition but when you're installing it on your own machine version numbers and release dates may have changed.
pay attention to the version and release date before the file extension. it will be something like
... 1.8.7-2010.02
this will change to something like 2011.03, 2011.04... etc in the future.
just double check the paths on when you are installing and make the necessary substitutions
ruby enterprise edition is available at http://www.rubyenterpriseedition.com/download.html
wget http://rubyforge.org/frs/download.php/71096/ruby-enterprise-1.8.7-2010.02.tar.gz
tar xzvf ruby-enterprise-1.8.7-2010.02.tar.gz 
./ruby-enterprise-1.8.7-2010.02/installer
this may take a little while (just follow the instructions)
and hit enter to install in default location (recommended) when prompted
and to install passenger (which is mod_rails for apache)
/opt/ruby-enterprise-1.8.7-2010.02/bin/passenger-install-apache2-module 
i take the output from the above script and add it to my available modules directory
vim /etc/apache2/mods-available/passenger.conf
and enter something like this in the newly created file (your version numbers will prob. be different)
LoadModule passenger_module /opt/ruby-enterprise-1.8.7-2010.02/lib/ruby/gems/1.8/gems/passenger-3.0.2/ext/apache2/mod_passenger.so
PassengerRoot /opt/ruby-enterprise-1.8.7-2010.02/lib/ruby/gems/1.8/gems/passenger-3.0.2
PassengerRuby /opt/ruby-enterprise-1.8.7-2010.02/bin/ruby
and then sym link it to the enabled directory so that apache knows about it
ln -s /etc/apache2/mods-available/passenger.conf /etc/apache2/mods-enabled/passenger.conf
and now i want to include ruby enterprise edition in my path so i add it to my profile (again make sure the path is correct)
vim /etc/profile.d/passenger.sh
export PATH=/opt/ruby-enterprise-1.8.7-2010.02/bin:$PATH
. /etc/profile.d/passenger.sh
the "." file will make the setting available for the current terminal session
rails -v
ruby -v
rake -v
should all be working now
and
which ruby
should point to the ruby enterprise edition under /opt
next i
set up public/private keys
so i can do
ssh localhost without using a password
cd
test -e ~/.ssh/id_dsa.pub || ssh-keygen -t dsa
cat ~/.ssh/id_dsa.pub >> ~/.ssh/authorized_keys2
and finally install git
apt-get install git-core

You should now have a server ready to server ruby on rails applications!