Mongrel is the cool new thing in Rails deployment (even the main Rails site uses it now), but making it run well still requires some fussing and fiddling.  Two tips I recently ran across are worth mentioning:

1. If you're using Pound (the best option until lighttpd's proxy support improves), you may want to adjust the TimeOut value therein.  It's really really short.
2. If you're using MySQL, there is a mismatch between the interactive_timeout variable in MySQL server and the timeout Rails uses.  Add the line ActiveRecord::Base.verification_timeout = 14400
   to config/environment.rb to prevent... unpleasantness.

My mongrel installation is still having hiccups once a day or so, but these two tips together have improved its stability quite a bit.