That is indeed the issue if you want to convert an existing rails app to JRuby. But if you're just starting out, it's a different story: you'll end up much more JVM-focused since the best option is generally to use the java equivalent instead of a ruby gem, but there are options.
I've been using rails for almost 7 years now (holy crap) and run a medium-sized site on it. It works just fine, but if I were starting from scratch today, I would still use Rails, but I'd run it on JRuby.
Agreed. There are certainly some people who can't use the JVM for some reason (client libraries being a common one), but I think most people would be best served by using JRuby. There's a lot of innovation going on there, and platforms like Torquebox[1] have some compelling benefits.
I've been using rails for almost 7 years now (holy crap) and run a medium-sized site on it. It works just fine, but if I were starting from scratch today, I would still use Rails, but I'd run it on JRuby.