Your first step to application tuning should always be to measure, then tune. Start with the application, then work your way down.
But when you do start moving down to tune your Rails stack, how do you proceed? This write up does a pretty good job of showing you some great options.
Testing Various Configurations of Rails, Merb, Swiftiply, and Nginx
From memcached to Nginx to evented mogrels, there are some good bits in here. I'm not sure I'm ready to rewrite my Rails app in Merb... but if you don't learn a bit about it, you'll never know if it suits your next app.
Btw, memcached isn't a Ruby/Rails only technology. Check it out for your Java/PHP/etc app as well.
